The bitcoin bulls were excited when the price soared to $ 69,000 on November 10th as a cumulative gain of 14.5% in 5 days meant they were making gains on the November 12th expiration date of the option last week in November valued at $ 715 million
However, the price move of 9% down on November 16 took the bulls by surprise as most of the call options for November 19 were placed at $ 66,000 or higher. Oddly enough, this price point is more the exception than the norm.
Bitcoin price chart | Source: TradingView
The bears may have been lucky as two negative events have occurred in the past few days. On November 12, the United States Securities and Exchange Commission (SEC) denied VanEck’s application for a spot Bitcoin ETF. But more important than the rejection itself expected by many was the reasoning behind the decision.
The SEC has clearly addressed its uncertainty regarding Stablecoin Tether (USDT) and its inability to prevent fraud and market manipulation in Bitcoin trading. Bloomberg senior ETF analyst and crypto expert Eric Balchunas predicted that the likelihood of approval is only 1%, so the rejection shouldn’t really come as a surprise.
In addition, US President Joe Biden has. on November 15th confirm Infrastructure Act, which will require reporting of digital asset transactions greater than $ 10,000 to the Internal Revenue Service (IRS) from 2024.
Given the scenario above, the bulls are likely to regret the lack of more conservative bets on the $ 1.1 billion full rights lot expiring tomorrow (November 19th).
Bitcoin Options OI summary for November 19th | Source: Bybt
$ 630 million call options have a 35% weekly expiry advantage over $ 470 million put options. The 1.35 call-to-put ratio is inaccurate, however, as the recent price crash is likely to nullify most bullish bets.
For example, if Bitcoin price is still below $ 62,000 tomorrow at 3:00 p.m. KST, there will only be $ 68 million available for call options. Example: The right to buy Bitcoin for $ 64,000 would have no value if it traded below that price.
Bears are trying to push Bitcoin below $ 60,000
Here are the four most likely scenarios for a $ 1.1 billion bitcoin option lot expiring tomorrow. The imbalance in favor of each party represents the theoretical profit. In other words, depending on the price at expiry, the number of active buy and sell contracts varies:
- From $ 58,000 to $ 60,000: 10 buy orders vs. 3,840 sell orders. The net result is $ 220 million in favor of the put (bear).
- From $ 60,000 to $ 62,000: 910 buy orders vs. 1,950 sell orders. The net result was $ 60 million in favor of put options (bears).
- From $ 62,000 to $ 64,000: 2,030 buy orders vs. 940 sell orders. The net result is $ 70 million in favor of the call (bull).
- Over $ 64,000: 2,920 buy orders vs. 240 sell orders. The net result is $ 175 million in favor of the call (bull).
This rough estimate looks at calls used in bullish strategies and employs neutral to bearish trades. However, this simplification does not imply more complex investment strategies.
Bulls need to push Bitcoin up 6% to turn the tide
The only way for the bulls to make some significant gains tomorrow is to push Bitcoin price above $ 64,000, up 6% from current levels of $ 60.673. 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 bears, slightly reducing the likelihood of a rally before November 19th.
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Disclaimer: This article is for informational purposes only, not investment advice. Investors should research carefully before making a decision. We are not responsible for your investment decisions.
According to Cointelegraph