Bitcoin’s spike to $ 67,000 has given the bulls an edge as $ 1.8 billion worth of BTC options expire today (Oct. 22).
Two or three weeks ago, when Bitcoin was still trading below $ 52,000, a trader who bet on Bitcoin’s price at $ 65,000 today would be viewed as extremely bullish. The fact is that 98% of the put options on weekly bitcoin options that expire on October 22nd were placed below this price.
Fast forward to this week and the successful launch of the first Bitcoin Exchange Traded Fund (ETF) in the US, and Digital Currency Group (DCG), the parent company of Grayscale Bitcoin Trust, has raised its collection limit of $ 1 billion to GBTC- Stock that drove the price of Bitcoin to an all-time high (ATH).
Grayscale Bitcoin Trust has been trading in the US markets since March 2015, and the company recently filed a conversion from GBTC to ETF with the US Securities and Exchange Commission (SEC).
Bitcoin price chart | Source: TradingView
The parabolic surge to a new ATH of $ 67,000 on October 20 was also fueled by optimistic remarks from billionaire investor Carl Icahn. With four decades of sky-high returns, Icahn warned of an impending financial crisis and highlighted the power of Bitcoin as a hedge against inflation.
In addition, Vasiliy Shpak, Russia’s Deputy Minister of Industry and Trade, is said to have tabled a proposal to use the country’s gas production to operate cryptocurrency mining. The Russian government has tried to cut gas to cut emissions, but is struggling to meet the target due to underdeveloped infrastructure.
Call options valued at $ 1 billion today predominate at maturity versus $ 810 million for put options.
Bitcoin Options Open Rate Summary for October 22nd | Source: Bybt
The 1.23 call-to-put ratio is not true as the recent rally is likely to undo most bearish bets if Bitcoin price is above $ 64,000 today at 3:00 p.m. (UTC + 8). The right to sell Bitcoin for $ 60,000 has no value if it trades above that price.
Here are the four most likely scenarios for option expiration. An imbalance in favor of either party represents a potential gain from the expiration. In other words, depending on the expiry price, the number of active buy and sell contracts will vary:
- From $ 60,000 to $ 62,000: 8,670 buy orders vs. 3,070 sell orders. Net income is $ 335 million in favor of call options (bulls).
- From $ 62,000 to $ 64,000: 10,780 buy orders vs. 2,100 sell orders. Net income is $ 540 million in favor of call options (bulls).
- From $ 64,000 to $ 66,000: 13,050 buy orders vs. 280 sell orders. The net result is $ 830 million in favor of call options (bulls).
- Over $ 68,000: 13,680 buy orders vs. 20 sell orders. The net result is a complete bull dominance at $ 940 million.
This rough estimate looks at calls that are used in bullish bets and puts that are neutral to bearish. However, investors could have used a more complex strategy that often involves different expiration dates.
The bears must push the price below $ 62,000 to reduce losses
In any of the situations presented above, the bulls have absolute control over the expiration times of the options. The positive flow of information this week shows that investors are not taking profits or accepting price corrections before expiry. On the flip side, the bears will have to push the price below $ 62,000 to avoid a loss of $ 830 million.
Traders need to keep in mind that during rallies, sellers’ attempts to lower prices are enormous and often ineffective. Currently, options market data shows a significant advantage from calls, leading to more bullish bets for the October 29 monthly expiration.
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According to Cointelegraph