Friday’s $ 3.2 Billion Bitcoin Options Expiration Could Kick Off New Rally

Bitcoin (BTC) has been fluctuating in a descending channel pattern since its all-time high of $ 67,000 on October 20, which was just one day after the ProShares Bitcoin Strategy ETF (BITO) debuted on the Nasdaq.

Nevertheless, the bulls have a sufficient number of incentives to fix the price of Bitcoin above $ 60,000 on October 29, when the monthly option expiration, amounting to USD 3.2 billion, occurs.

Bitcoin price in USD (Coinbase). Source: TradingView

Investors are currently showing mixed feelings about the approval of the exchange-traded fund, despite having reached $ 1 billion in assets under management in 48 hours. Either market expectations for these funds were incredibly high, or the 42% gain in October would have already hit the price.

Regulatory uncertainty in the United States is also a deciding factor in preventing some large institutional investors from entering the sector. In a hearing held on October 26 in the United States Senate Committee, Rostin Behnam, acting chairman of the Commodity Futures Trading Commission (CFTC), compared the government agency’s application in the space of digital assets with a policeman on duty.

Behman added:

“The market operations that are taking place right now are a huge part of the risk posed by digital assets.”

The bulls gamble on a potential profit of $ 715 million

Typically, these observations would have little to no impact in a bull market, raising the question of whether the 13% correction from the all-time high on October 20 marks the end of a positive cycle.

The October 29 monthly expiration will be a test of strength for the bears because any price above $ 58,000 means a profit of $ 385 million or more for the bulls.

Added open interest in Bitcon options for October 29. Source: Bybt

At a glance, $ 1.94 billion call instruments dominate monthly maturity by 56% compared to $ 1.24 billion put options.

Nevertheless, the 1.56 call / put ratio is misleading because the bears were caught off guard and most of their options will lose their value if the price of Bitcoin sustains above $ 58,000 at 8:00 a.m. UTC October 29.

Owning a put option, which is the right to sell Bitcoin at $ 55,000, will be worthless if the price of BTC is trading above that level.

Bulls are comfortable above $ 58,000

68% of the put options were opened at a price of USD 58,000 or less.

Below are the four most likely scenarios that take into account current price levels. In addition, the data shows how many contracts will be in play on October 29 for bullish (call) and bearish (put) instruments.

  • Between $ 52,000 and $ 55,000: 6,500 call options versus 6,530 put. The net result is balanced between bulls and bears.
  • Between $ 55,000 and $ 58,000: 9,510 call options versus 4,610 put. The net result favors the bulls by $ 270 million.
  • Between $ 58,000 and $ 60,000: 9,900 call options versus 3,490 put. The net result continues to favor the bulls at $ 385 million.
  • Above $ 60,000: 13,870 call options versus 1,970 put. The net result will benefit the bulls at $ 715 million.

As shown above, the imbalance favoring either side represents the hypothetical potential gain on expiration.

This gross estimate considers the call options used in bullish strategies and the put options exclusively in neutral or bearish operations. However, a trader could have sold a put option, effectively gaining positive exposure to Bitcoin above a specific price. Unfortunately, there is no effective way to estimate this effect.

Can the bears take the price of Bitcoin below $ 55,000?

The bears need a 6% correction from the current price of $ 58,500 to avoid a loss of $ 270 million. Although it may not seem like much at first, traders should also take into account the bullish momentum that the approval of the ETF has brought.

With less than 36 hours of expiration on October 29, the bears are likely to score a win by keeping the price of Bitcoin above $ 59,000. As for the bears, the road to less than $ 55,000 seems a long way off, but it could be worth it.

The views and opinions expressed here are solely those of the Author and do not necessarily reflect the views of Each investment and commercial movement involves risks, you must do your own research when making a decision.

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