With the expiration of the $275 million BTC option on Friday, there is talk of the Bitcoin price going up to 18 thousand dollars.
Option control in bulls
Bitcoin bulls are aiming to push the BTC price to $18,000, and the options data outlines the obvious reasons for this. Bitcoin price hit a three-week high on January 12, hitting $18,144. Price action has given the bulls control of the $275 million weekly BTC option expiring Jan. 13, as bears are betting $16,500 and lower.
The latest move calls for permabulls and bottom buyers to the bottom of the market and the potential end of the bear market, but what does the data really show?
Is the Bitcoin bear market over?
It may seem too pessimistic to say right now, but Bitcoin traded below the $16,500 level on Dec. 30 and these bearish bets are unlikely to pay off as the option deadline approaches.
Investors’ main hope is that the US Federal Reserve will stop raising interest rates in the first quarter of 2023. The Consumer Price Index (CPI) inflation report, which will be announced on January 12, may give a clue as to whether the interest rate will rise. The Central Bank’s efforts to slow down the economy and reduce inflation yield the expected results.
Meanwhile, crypto traders fear that a possible pullback in traditional markets could cause Bitcoin to retest $15,500. Mike Wilson, Morgan Stanley’s chief investment officer and chief U.S. equity strategist, told investors at CNBC to prepare for the winter fall and warned that the S&P 500 index is vulnerable to falling 23% to 3,000. “While most corporate clients think we’re probably going to be in a recession, they don’t seem to be frightened by it,” Wilson said. It’s just a big disconnect.” he added.
Bitcoin bears did not expect the rally to rise so high
The open interest for the January 13 option expiration is $275 million, but the actual figure will be lower as bears expect prices to be below $16,500. The bulls seem to be in total control, though their payouts become much larger at $18,000 and above.
The buy-to-sell ratio of 1.18 reflects the imbalance between $150 million of call (buy) open interest and $125 million of put (sell) options. If the price of Bitcoin stays above $17,000 on January 13 at 08:00 UTC, the value of these put options will be less than $2 million. This difference is due to the fact that the right to sell Bitcoin at $16,500 or $15,500 is useless if BTC trades above this level at expiry.
$18,000 in Bitcoin will give bulls $130 million in profit
Below are the four most likely scenarios based on the current price action. The number of options contracts available for buy (bull) and put (bear) documents on January 13 varies depending on the expiry price. The imbalance in favor of both parties creates theoretical profit. These scenarios are:
- Between $16,000 and $16,500: 2,700 sales against 100 calls. Net result, sales (bear) documents support $40 million.
- Between $16,500 and $17,500: 1,500 sales against 1,400 calls. The net result is balanced between bears and bulls.
- Between $17,500 and $18,000: 100 sales against 4,500 calls. Net result, buy (bull) documents support $75 million.
- Between $18,000 and $19,000: 0 sales versus 7,200 calls. The bulls completely dominate the expiry, making a profit of $130 million.
This rough estimate considers put options used in bearish bets and call options specifically in neutral-bullish trades. However, this oversimplification ignores more complex investment strategies. cryptocoin.comAs we mentioned, BTC is instantly traded at $ 18,144.
The four-day rally posted a total gain of 4.5% and liquidated $285 million of leveraged short (sell) futures contracts, so they may have less margin to drive down the price of Bitcoin. Given the uncertainty of the upcoming CPI inflation data, all bets are on the table.
