The 1.1B USD Bitcoin option will expire on Friday, but the data shows that the Bitcoin price is lower than 55,000 USD


Bitcoin (Bitcoin) The bulls are still licking the bloody correction wound on December 4, which leads to Price plummeted from $57,000 Up to $42,000.This 26.5% downtrend led to the liquidation of USD 850 million long BTC futures contracts, but more importantly, it changed “Fear and Greed Index“To the lowest level since July 21.

Bitcoin/USD price of FTX. Source: TradingView

It is a bit strange to compare these two events, because the low of below $30,000 on July 21 will erase all the gains in 2021. At the same time, the low of $42,000 on December 4 is still up 44% so far this year. Compare this with the S&P 500 index, which rose 21% in 2021, and the WTI oil price, which rose 41%.

The bulls may be concerned Bitcoin reserves held by the exchange, Continues to decline, and is currently at its lowest level in three years. According to CryptoQuant data, there are now less than 2.27 million Bitcoins deposited on exchanges, and there are fewer and fewer tokens available for trading, which shows that investors are unwilling to sell in the short term. This is a dynamic that many investors consider bullish.

Even though there is a clear balance between call (buy) and put (sell) options on Friday’s $1.1 billion expiry date, the short position is better after Bitcoin has stabilized at slightly above $50,000.

Bitcoin options aggregates open positions on October 10. Source: CoinGlass

The broader view using the call option ratio shows that Bitcoin bulls have a modest advantage of 7%, because the $555 million call (buy) instrument has a larger unbalanced position than the $520 million put (sell) option Warehouse volume. However, the 1.07 indicator is deceptive because the 11.5% price drop in the past week has caused most bullish bets to become worthless.

For example, if the price of Bitcoin stays below USD 52,000 at 8:00 AM UTC on December 10, then only USD 50 million worth of options among these call (purchase) options are available. The reason for this effect is that if the transaction price of Bitcoin is lower than that price, then the right to buy Bitcoin for $55,000 has no value.

The numbers indicate that the bulls will suffer heavy losses

The following are the three most likely scenarios based on current price movements. The number of option contracts available for long (call) and short (put) instruments on December 10 varies depending on the expiration price of BTC. An imbalance that benefits both parties constitutes a theoretical profit:

  • Between USD 47,000 and USD 50,000: 400 call options and 6,600 put options. The net result is $300 million in favor of bearish (bearish) instruments.
  • Between US$50,000 and US$54,000: 1,700 call options and 4,700 put options. The net result is $160 million in favor of bearish (bearish) instruments.
  • More than 54,000 USD: 2,400 call options and 2,900 put options. The net result is in favor of $30 million in put (put) options.

This rough estimate takes into account call options used in call bets and put options specifically for neutral to put trading. Even so, this over-simplification ignores more complex investment strategies.

For example, a trader could have sold a call option, effectively gaining a negative exposure to bitcoins above a certain price. Unfortunately, there is no easy way to estimate this impact.

The bears will do their best to keep BTC below $50,000

Bitcoin bears need a gentle push below $50,000 to make a profit of $300 million. On the other hand, the bulls need to recover from the current $50,500 by 7.2% to cut their losses in half.

Considering the US$2 billion liquidation of leveraged long positions on December 4, the bulls may try to make ends meet and are now unwilling to add more risks. For bullish investors, wasting energy to save such short-term losses is unnecessary and ineffective.

Therefore, in this case, the shorts look like they will maintain the advantage in this week’s option expiration.

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