This week’s combination of bearish factors was enough to bring the price of Bitcoin (BTC) back to its lowest level in 46 days, which nearly wiped out 86% of September’s $ 2 billion call (buy) options. which expire September 24.
There’s still room for a few surprises, especially since the deadline is 8:00 a.m. UTC on September 24. However, the incentives for bears appear weak as the test below $ 40,000 on September 21 caused less than $ 250 million in futures closeouts.
On September 22, Evergrande Group allayed some fears of default after confirming that it would pay interest on an onshore bond. Despite this, investors still expect the company to miss out on dollar-denominated bonds held primarily by international investors.
The recent move above $ 48,000 on September 18-19 was not enough to break the 20-day moving average resistance. The bulls are now clinging to their hopes of a “mean reversion” move, considering the peak in fear of Chinese debt contagion has passed. Additionally, no short-term action came from the interview of the Chairman of the United States Securities Commission (SEC), Gary Gensler, to the Washington Post on September 22.
While historical data plays a role in the price of Bitcoin, September has performed negatively in four of the previous five years. This downtrend will continue if BTC closes September below $ 47,110, its closing price on August 31.
The September monthly expiration will be a test of strength for the bulls, as 86% of the $ 2 million calls (calls) were placed at $ 46,000 or more. Therefore, if BTC trades below this price on September 17, the open interest of the neutral to bearish put is reduced to $ 285 million.
A call option is a right to buy Bitcoin at a predetermined price on the set expiration date. So a $ 50,000 call option becomes worthless if BTC trades below that price at 8:00 UTC on September 24.
Bulls Dominate BTC Price But They Are Too Confident
A broader view gives the bulls a significant advantage as the total open interest of the call (call) options instrument stands at $ 2 billion, which is a 90% lead on the options. neutral to bearish selling.
However, this data is misleading as excessive bulls’ optimism will likely wipe out most of their bets. Even the smallest open interest of $ 1.05 billion on put (put) options might be enough to balance these competing forces.
Below are the four most likely scenarios that take into account current price levels. The imbalance in favor of each side represents the potential profit from the expiration. The data below shows how many contracts will be available on Friday, based on the expiration price.
- Between $ 38,000 and $ 40,000: 3,390 calls against 8,695 put options. The net result is $ 21 million in favor of protective bear instruments.
- Between $ 40,000 and $ 46,000: The net result is balanced between bears and bulls.
- Between $ 46,000 and $ 50,000: 11,820 calls against 3,050 put options. The net result is $ 42 million in favor of call options (bull).
- Above $ 50,000: 16,370 calls against 1,400 put options. The bullish instruments would have an advance of $ 75 million.
This raw estimate naively considers that call (call) options are exclusively used in bullish strategies and put (put) options in neutral to bearish trades. Meanwhile, real life is not that simple as more complex investment strategies may have been deployed.
Incentives are in place for bears to keep BTC below $ 46,000
Buyers and sellers will be maximizing their efforts in the hours leading up to the Friday expiration. The bears will try to minimize the damage by keeping the price below $ 46,000. On the other hand, the bulls have decent control over the situation if BTC stays above such a level.
Is $ 75 million a profit large enough to justify a rally over $ 50,000? Not really, but as mentioned before, these are simplified estimates. This will mainly depend on how the market makers and arbitration bureaus are positioned, which is everyone’s guess.
There is still room for further volatility heading into Friday, but the two sides also look balanced despite the flashy $ 3 billion headline.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of TBEN. Every investment and trade move involves risk. You should do your own research before making a decision.