Bitcoin (BTC) bulls were excited when the price rose to $ 69,000 on November 10, as a cumulative increase of 14.5% in 5 days meant they made a profit of $ 715 million if the option expires on Friday.
However, the negative price move of 9% on November 16 took the bulls by surprise as most of the call (buy) options on Friday were placed at $ 66,000 or higher. Oddly enough, this price point is more the exception than the norm.
The bears may have been lucky because two negative events have occurred in the past few days. On November 12, the US Securities and Exchange Commission rejected VanEck’s application for a spot Bitcoin ETF. But more important than the expected rejection itself was the reason for the decision.
The SEC has explicitly addressed its uncertainty about stablecoin tether (USDT) and its inability to prevent fraud and market manipulation in Bitcoin trading. Bloomberg Senior Crypto and ETF Analyst Eric Balchunas the chance of getting approved was 1%, so the rejection wasn’t really that surprising.
In addition, on November 15, US President Joe Biden sanctioned the Infrastructure Act, which stipulates that from 2024 transactions involving digital assets worth more than US $ 10,000 must be reported to the Internal Revenue Service.
Given the scenario above, the bulls are likely to regret the lack of their more conservative bets when the $ 1.1 billion weekly options expire on Friday.
At first glance, $ 630 million worth of call (buy) options dominated the weekly expiration time by 35% versus $ 470 million worth of put (sell) instruments. The 1.35 odds are deceptive, however, as the recent price crash is likely to nullify most bullish bets.
For example, if Bitcoin price stays below $ 62,000 at 8 a.m. UTC on November 19th, these call (buy) options will only be available to the value of $ 68 million. For example, the right to buy Bitcoin for $ 64,000 has no value if it trades below that price.
Bears keep an eye on prices below $ 60,000
Here are the four most likely scenarios for the $ 1.1 billion expiration date on November 19th. The imbalance in favor of each party represents the theoretical profit. In other words, the number of active call (buy) and put (sell) contracts is different depending on the expiry price:
- From $ 58,000 to $ 60,000: 10 calls versus 3,840 bookings. The net result is $ 220 million in favor of the put (Bear).
- From $ 60,000 to $ 62,000: 910 calls versus 1,950 bookings. The net result is $ 60 million in favor of put instruments (bears).
- From $ 62,000 to $ 64,000: 2,030 calls versus 940 bookings. The net result was $ 70 million in favor of a bullish call.
- Over $ 64,000: 2,920 calls versus 240 bookings. $ 175 million net income supporting cops.
This rough estimate takes into account calls used in bullish bets and only places calls on neutral to bearish trades. However, this oversimplification ignores more complex investment strategies.
For example, a trader could have sold a put, effectively making Bitcoin (BTC) positive levels above a certain price. But unfortunately there is no easy way to gauge this effect.
The bulls need a 6% increase to turn the tide
The only way for the bulls to make any significant amount of money on Friday is to push Bitcoin price above $ 64,000, 6% off the current $ 60,400 level. If the current negative short-term sentiment prevails, the bears can put some pressure on and seek to take profits of up to $ 220 million if Bitcoin price stays near $ 58,000.
Right now, options market data is slightly favoring the put (sell), which slightly reduces the likelihood of a rally before November 19th.
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 risk. You should do your own research when making a decision.