Bulls – Bears are weighing their brains if tomorrow $ 1.2 billion in Bitcoin options expires
Bitcoin’s spike to $ 69,000 surprised the bears and the bulls consolidated expected gains to $ 400 million from $ 1.2 billion in options tomorrow (Nov. 12).
Every time Bitcoin sets a new all-time high (ATH), exaggerated expectations follow. This time around is no exception as the price quickly hit $ 69,000 last night (Nov. 10).
Bitcoin 8h, we received our historical correction from November 9th, seems to be very low for the time being. Of course, I expect a bigger correction after we hit the 84k region and then into the explosion.$ BTC #Crypto #Bitcoin pic.twitter.com/cfbBkOIFEK
– Miles J Creative (@JohalMiles) November 9, 2021
“Bitcoin 8 o’clock, the historical correction on November 9th seems to be very small for the time being. Of course, I expect a bigger correction after BTC entered the $ 84,000 region and then exploded. “
Words are free to buy, so there is nothing to lose if expectations rise or fall too much, but in options markets you have to pay a premium for these bets. For example, on November 10, a Bitcoin call option for $ 100,000 traded at 0.022 BTC ($ 1,460) on December 31. In order to receive this privilege, the investor must pay an upfront fee, also known as a premium.
Analysts and experts quickly set their $ 100,000 target after Bitcoin hit its highest monthly close ever. However, history has shown that short-term price estimates rarely work.
Bitcoin price estimates often deviate from the trajectory
While Tim Draper is a successful venture capitalist, the 2020 price prediction of $ 250,000 is 88% lower. Famous banking analysts can also make mistakes. Citibank Global Product Manager Tom Fitzpatrick points to a potential high of $ 318,000 for Bitcoin in 2021. However, in 50 days to the end of the year, it is possible that some of these prophecies will come true, but most will be a random number.
Bitcoin price forecast chart | Source: Twitter
The bears may have regulatory hurdles in their sights, such as Singapore, which is the last country to ban crypto-derivative services. On Tuesday (November 9th), Huobi Global announced that it would close all users’ accounts in Singapore by the end of March 2022. In September, the Thai Securities and Exchange Commission also recommended revoking Huobi’s local operating license.
An initial analysis based on the open interest (OI) of call and put options shows an equilibrium for options of $ 1.2 billion that expire on November 12th.
Bitcoin Options OI Summary November 12th | Source: Bybt
The $ 630 million call options are just 12% ahead of the $ 565 million put options at weekly expiration.
However, the current 1.12 call-to-put ratio is inaccurate as the recent rally is likely to undo most bearish bets. For example, if Bitcoin price is still above $ 66,000 today at 3:00 p.m. KST, almost every put option will be worthless. There is no right to sell Bitcoin for $ 58,000 or $ 62,000 when the price is above it.
Bulls could profit $ 410 million if Bitcoin trades above $ 70,000
Here are the four most likely scenarios for options forfeiture tomorrow. The imbalance in favor of one of the parties represents the theoretical profit. In other words, depending on the expiry price, the number of active buy and sell contracts varies:
- From $ 64,000 to $ 66,000: 2,440 buy orders vs. 310 sell orders. Net income is $ 135 million in favor of call options (bulls).
- From $ 66,000 to $ 68,000: 3,430 buy orders vs. 50 sell orders. The net result is $ 225 million in favor of call options (bulls).
- From $ 68,000 to $ 70,000: 44,070 buy orders vs. 10 sell orders. Net income is $ 305 million in favor of call options (bulls).
- Over $ 70,000: 5,820 buy orders vs. 0 sell orders. The net result is a complete bull dominance at $ 410 million.
This rough estimate assumes that a call is only used in bullish bets, while a put is used in neutral to bearish trades. This simplification does not imply any more complex investment strategies.
After the 30-day rally of 19%, the bulls prevailed during the weekly run on November 12th. Part of this was due to the lack of an adverse pricing impact from the Value Infrastructure bill. The bill requires that all digital asset transactions greater than $ 10,000 be reported to the Internal Revenue Service (IRS).
Traders need to keep in mind that even bearish news has little or no effect on prices during a bull run.
The bulls can capitalize on the current situation by pushing Bitcoin above $ 70,000, which will result in an estimated profit surge from $ 105 million to a total of $ 410 million.
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Disclaimer: This article is for informational purposes only, not investment advice. Investors should research carefully before making a decision. We are not responsible for your investment decisions.
According to Cointelegraph