Bitcoin (BTC) has been on the market since it was heavily rejected at $ 53,000 on Jan.
To add to the negative sentiment, major crypto exchanges like Binance and Huobi have shut down some services in mainland China and some of the largest Ethereum mining pools like Sparkpool and BeePool have had to shut down completely.
Based on the graph above, it’s understandable why buyers place 80% of their bets at $ 44,000 or more. However, in the past two weeks, these calls have rapidly depreciated in value.
On September 25, the People’s Bank of China (PBoC) issued a nationwide ban on cryptocurrencies and banned companies from offering financial transactions and services to market participants. This news sparked an 8% drop in bitcoin price along with a wider retracement for altcoins.
The bearish sentiment was confirmed after Tesla CEO Elon Musk expressed support for the cryptocurrency at the Code Conference in California.
“I think it is impossible to destroy cryptocurrencies, but governments can slow their development.”
Had we been in a neutral to bullish market, these remarks could have reversed the negative trend. For example, on July 21, Elon Musk said that Bitcoin had hit its renewable energy benchmark. As a result, Bitcoin price, which had previously fallen 12% in ten days, reversed the move and gained 35% over the next ten days.
The October 1st expiration date will be a test of strength for the bulls as any price below $ 42,000 would spell a carnage with the absolute dominance of put options.
Initially, neutral to bullish instruments valued at € 285 million dominated.
The 1.21 call-to-put ratio is deceptive, however, as the bulls’ over-optimism could ruin most of their bets if Bitcoin price stays below $ 43,000 at 8 a.m. UTC on Friday.
After all, what is the right to buy Bitcoin for $ 50,000 if it trades below that price?
The bear was also suddenly caught
Sixty-six percent of the put options that give the buyer the right to sell Bitcoin at a preset price were set at $ 42,000 or less. These neutral to bearish instruments would become worthless if Bitcoin traded above this price on Friday morning.
Here are the four most likely scenarios considering current prices. An imbalance in favor of either party represents a potential gain from the expiration.
The data shows how many contracts will be available based on the expiry price on Friday.
- From $ 40,000 to $ 41,000: 110 calls versus 4,470 bookings. Net income is $ 175 million in favor of protective (bear) put instruments.
- From $ 41,000 to $ 43,000: 640 calls versus 4,000 calls. The net result continues to trend in favor of the $ 140 million bears.
- From $ 43,000 to $ 45,000: 1,780 calls versus 2,070 bookings. The net result is a bear-bull balance.
- Over $ 45,000: 2,530 calls versus 1,090 bookings. The net result shifts another $ 65 million in favor of the cops.
This rough estimate looks at call (buy) options used in bullish and put (sell) strategies specifically for neutral to bearish trades. Unfortunately, real life isn’t that simple as more complex investment strategies may be in the works.
For example, a trader could have sold a put, effectively making a positive level for Bitcoin above a certain price. Hence, there is no easy way to gauge this effect, so the simple analysis above is a good guess.
From today’s perspective, the bears have absolute control over the October 1st deadline and they have some good reasons to keep pushing the price below $ 43,000.
Unless there is unexpected buying pressure in the next 12 hours, the amount of capital the bulls need to force the market above $ 45,000 seems huge and unbelievable.
On the flip side, the bears need a 5% negative price swing to bring BTC below $ 41,000 and increase the lead by $ 35 million. This step also brings little profit for the effort required.
The only hope for the bulls lies in an unexpected influx of positive news about Bitcoin price before October 1st at 8:00 a.m. UTC. If sensible course of action is certain, it will likely take place over the weekend when the flow is less active.
The views and opinions expressed here are solely those of author and do not necessarily reflect the views of Cointelegraph. Every investment and trading movement involves risks. You should do your own research when making a decision.