Tuesday, May 30, 2023

3 Reasons Bitcoin Bulls Are Well Invested To Benefit From This Week’s $4.2 Billion Options Expiration

Regulation remains a top concern for Bitcoin bulls, especially after the Commodity Futures Trading Commission (CTC) sued Binance for trading and derivatives law violations. The regulator wants Binance to repay trading profits, income, salaries, commissions, loans and fees received from US citizens, in addition to paying penalties for civil violations.

Bitcoin’s price rise was also fueled by a change in sentiment toward risky assets after Federal Reserve Chairman Jerome Powell said interest rate hikes are no longer a failure measure to curb inflation. The central bank realized that the current situation would “lead to more restrictive credit conditions for households and businesses, which in turn would affect economic results”.

Fixed income investors earn more when interest rates rise, making them less willing to buy stocks and bonds. Consequently, by changing the policy and adding $339 billion in debt for two weeks, the Federal Reserve wanted to contain the banking crisis, which can cause an uncontrolled spiral of inflation.

Given the rising risk scenario, Bitcoin bulls could benefit from as much as $1.4 billion in monthly options expiration on Friday.

Bitcoin bears have been caught completely crushed

The open interest for the options expiring on March 31 is $4.2bn, but the actual figure will be lower as the price level is expected to be below $26.5bn. These traders were caught off guard when Bitcoin rose 32% between March 12 and 17.

Subspecies open interest in Bitcoin well for March 31. Source: CoinGlass

The 1.34 call impossibility ratio represents between $2.4 billion of open interest in call options and $1.8 billion in put options. However, if the price of Bitcoin supports near $28,000 at 8:00 UTC on March 31, only $25 million worth of well-placed options will be available. This difference occurs because the right to sell Bitcoin at $26,000 or $27,000 is void if BTC trades above that expiration level.

Bulls target $29,000 for a record $1.4 billion profit

Below are the four most likely scenarios for current price developments. The number of option contracts available as of March 31 for call (bullish) and put instruments varies depending on the strike price. The inequality which favors both parties constitutes a theoretical benefit;

  • Between $25,000 and $26,000: 27,200 call options vs. Set 12,700 options. The net result helps to buy (bullish) instruments from USD 360 million.
  • Between $26,000 and $27,000: 32,300 call options vs. Set 8,500 options. The net result helps to buy (bullish) instruments from USD 620 million.
  • Between $27,000 and $28,000: 38,100 call options vs. Set 3,000 options. The bulls increase their lead to $1.2 billion.
  • Between $28,000 and $30,000: 48,300 call options vs. Set 400 options. Bulls dominate by making $1.4 billion.
  • This rough estimate considers call options used in bull bets and options placed only on trades between neutral and unbiased. Also, this oversimplification does not take into account the more complex aspects of investing.

    For example, a trader could sell a call option, thereby acquiring a negative exposure to Bitcoin above a certain price, but unfortunately there is no easy way to evaluate this.

    Bears’ best hope rests on regulatory FUD

    Bulls need to push Bitcoin’s price above $29,000 by March 31 to lock in a potential profit of $1.4 billion. The bears’ best bet, on the other hand, is more FUD control in stablecoins or major cryptocurrency exchanges, which has succeeded so far.

    Considering the bullish momentum from the Fed’s inability to continue raising interest rates, bulls are well positioned to sell off monthly BTC options in March. That profit will probably be used for further confirmation in $28,000 $28,000, so the result is expected to be worried especially about the bears.

    The price of Bitcoin (BTC) has been hovering around $28,000 in the past ten days, but the cryptocurrency is up 70.5% year-to-date. As of April 17, Bitcoin was trading below $25,000, and this means that most of the unsecured bets for the $4.2 billion March option expiration were placed at or below $26,500.

    This article does not contain investment advice or recommendations. All investing and trading involves risk, so readers should do their research before making a decision.

    The opinions, thoughts and beliefs expressed herein are solely those of the authors and do not necessarily reflect or represent the views and opinions of Cointelegraph.

    Research into crypto assets is not regulated. They may be eligible for sales and all the money invested will be lost. The services or products offered are not directed at or accessible to investors in Spain.

    Nation World News Desk
    Nation World News Deskhttps://nationworldnews.com/
    Nation World News is the fastest emerging news website covering all the latest news, world’s top stories, science news entertainment sports cricket’s latest discoveries, new technology gadgets, politics news, and more.
    Latest news
    Related news


    Please enter your comment!
    Please enter your name here