Bulls still dominate as $860 million worth of Bitcoin options expire today

Bitcoin (BTC) bulls have good reason to celebrate a 15.8% growth this week. It is heading towards $46k and to the surprise of many investors, $43k is solid support despite the volatility caused by yesterday’s US inflation data (10/2).

Bitcoin price chart | Source: Trade View

On the macroeconomic front, there were mixed feelings. For example, retail sales in the Eurozone disappointed on February 4th when annual growth came in at 2%, much lower than the 5.1% expectation. Meanwhile, the US Bureau of Labor Statistics (BLS) showed a 467,000 increase in jobs at goods, construction and manufacturing companies.

Despite stronger-than-expected economic growth in China and the United States, investors are increasingly concerned about corporate earnings. In the past few weeks, some big names have hit it off, including Meta (FB), Delivery Hero (DHER-DE) and PayPal (PYPL).

Yesterday (February 10), the US Department of Labor announced that the annual US consumer price index (CPI) rose to 7.5%, which should support US Federal Reserve (Fed) expectations of at least two interest rate hikes in 2022 and not many investors can take shelter from government bonds as 5-year government bond yields are currently at 1.9%.

Bitcoin is still a risky asset

Considering that the S&P 500 is only 5% off its all-time high (ATH), Bitcoin’s recent strength should come as no surprise. Oddly enough, put options were dominant during today’s option expiration (February 11), but bears were caught off guard after bitcoin price stabilized around $43,000 this week.

Bitcoin Options Open Interest Summary for February 11th | Source: CoinGlass

A broader view using call-to-put ratios shows a 14% advantage for bitcoin bears, as $400 million call options have lower open interest (OIs) than value put options of $460 million. However, the call-to-put ratio of 0.86 is not accurate as most down bets become worthless.

For example, if bitcoin price were still above $44,000 at 3:00 p.m. KST this afternoon, only $55 million of these put options would be available. This effect occurs because the right to sell Bitcoin at $40,000 is worthless if the BTC price is trading above this level.

Bitcoin bulls aim for $300 million profit

Here are the three most likely scenarios based on current price action. The imbalance in favor of each side represents the theoretical gain. In other words, depending on the price at expiry, the number of active buy and sell contracts varies:

• From $42,000 to $44,000: 4,550 buy orders versus 1,750 sell orders. The net result is $120 million in favor of the call option (bulls).
• From $44,000 to $46,000: 6,380 buy orders versus 860 sell orders. The net result is a $250 million gain for the bulls.
• From $46,000 to $48,000: 7,860 buy orders vs. 50 sell orders. The net result supports the call option (bulls) by $350 million.

This rough estimate looks at the calls used in bullish bets and puts specifically for neutral to bearish trades. Nevertheless, this oversimplification does not imply more complex investment strategies.

The bears don’t seem to stand a chance

Bitcoin bulls need a small pump above $46,000 for a $350 million profit today. On the other hand, the best-case scenario for the bears right now is to sink the price below $42,000 to cut losses to $120 million.

Bitcoin bears currently have no reason to go short given the recent data. Therefore, the bulls will continue to show strength by propelling the price to $46,000 or higher during today’s options expiration.

A gain of $350 million could be just what the bulls need to regain confidence and reopen leveraged long positions, causing further upward pressure.

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