[ad_1]
Bitcoin’s (BTC) 32% weekly rally has become a bears’ worst nightmare as Friday’s $ 860 million options expiration approaches. After breaking through the $ 54,000 level, over 99% of bearish bets using puts (puts) are at risk of becoming worthless.
The bears are in a dangerous position, especially as Bloomberg’s Crypto Outlook pointed out that Bitcoin’s $ 50,000 resistance was on the verge of reversing support. Senior commodities strategist Mike McGlone cited factors such as increased adoption as well as decreased supply on exchanges.
Bloomberg also noted that concerns among traditional financial investors increased after protection against the possibility of a U.S. government default hit its highest level in six years. In addition, one-year credit default swaps, or the cost of insuring against late payment, has fallen from 4 basis points to 27 basis points since mid-September.
Another crucial metric that certainly fueled this week’s bull run was Bitcoin’s hash rate, with the estimated processing power supporting miners on the network. Capacity suffered a severe blow in May, as China vetoed the use of coal-based energy for cryptocurrency mining. Then, in early June, the country decided to permanently ban cryptocurrency mining, which temporarily took many miners offline, impacting the hash rate.
This week, the bulls took advantage of these favorable conditions and pushed Bitcoin to its highest level since May 12 at $ 55,000. As for the $ 860 million options expiration on Friday October 8, the bears need a miracle to push the price below $ 50,000 to avoid significant losses.
As the data above shows, the bears have placed $ 400 million in bets for Friday’s expiration, but it looks like they’ve been taken by surprise as 99% of puts (puts) are at risk of becoming valueless.
In other words, if Bitcoin stays above $ 54,000 on Friday, only $ 2.7 million of neutral to bearish put options will be activated upon expiration. A right to sell (put) Bitcoin at $ 50,000 becomes worthless if BTC trades above that price at 8:00 UTC on Friday.
Open interest is fairly balanced between bulls and bears
The call-to-put ratio of 1.16 represents the slight difference between the $ 465 million in call options (buy) and the $ 400 million in put (put) options. While favoring bulls, this broader view requires more detailed analysis as some bets are implausible given the current price.
Below are the four most likely scenarios for Friday’s expiration. The imbalance in favor of each side represents the theoretical profit. In other words, depending on the expiration price, the amount of buy (buy) and sell (sell) contracts that become active varies:
- Between $ 48,000 and $ 50,000: 3,515 calls against 1,765 put options. The net result is $ 85 million in favor of call instruments (bull).
- Between $ 50,000 and $ 54,000: 6,270 calls against 735 put options. The net result is 290 million dollars in favor of call instruments (bull).
- Between $ 54,000 and $ 56,000: 6,930 calls against 50 puts. The net result is $ 370 million in favor of call instruments (bull).
- Above $ 56,000: 7,600 calls against 0 put. The net result is complete dominance with bulls profiting at $ 425 million.
This rough estimate considers call options used exclusively in bullish bets and puts in neutral to bearish trades. However, investors may have used a more complex strategy which usually involves different expiration dates.
Bears are destroyed in one way or another
To sum up, the bulls have absolute control over the Friday expiration and enough incentive to keep the price above $ 54,000. On the other hand, bears need a 10% negative move below $ 50,000 to avoid the $ 370 million loss.
However, you have to consider that during bull races, like the one Bitcoin is currently in, the amount of effort a seller has to put into liquidating long positions is immense and generally ineffective. Simply put, if no surprises come before October 8, Bitcoin is likely to continue its rally towards higher prices.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trade move involves risk. You should do your own research before making a decision.
[ad_2]
Source link