last posts

$475 Million in Bitcoin Options Expires This Week - Are the Bulls or Bears About to Win?

Meta description

Bitcoin (BTC) has been showing higher lows over the past eight weeks, but during that time BTC was unable to topple the $24,000 resistance to support at least three different opportunities. This is precisely why the $475 million Bitcoin Options expiry on August 12 could be a game-changer for bulls.

Given the current regulatory pressures at play, there appears to be ample justification to avoid bullish bets, especially after the United States Securities and Exchange Commission filed a complaint against a former Coinbase official for illegal trading in securities on July 21.

The further impact of the implosion of the Terra (Luna) ecosystem – now renamed Terra Classic (LUC) – and the bankruptcy filing of crypto venture capital firm Three Arrows Capital (3AC) continue to weigh on the steps. The latest victim is crypto lending platform Hodlnaut, which suspended user withdrawals on August 8.

For this reason, most traders are holding their bets above $24,000, but events outside the crypto market could also have negatively impacted investor expectations. For example, according to regulatory filings released Aug. 9, Elon Musk sold $6.9 billion worth of Tesla stock.

Additionally, on August 8, Ark Investment CEO Cathie Wood explained that the 1.41 million Coinbase (COIN) shares sold in July were caused by regulatory uncertainty and its potential impact on the business model. of the crypto exchange.

Most bearish bets are below $23,000

Bitcoin’s failure to break below $21,000 on July 27 surprised bears as only 8% of puts (sells) on August 12 were placed above $23,000. Thus, Bitcoin bulls are better positioned for the weekly $475 million option expiration.

Bitcoin options aggregate open interest for August 12. Source: CoinGlass

A broader view using the call-to-put ratio of 1.23 shows more bullish bets as the call (buy) open interest stands at $262 million against the put (sell) options of 212 millions of dollars. Nonetheless, with Bitcoin currently hovering above $23,000, most bearish bets will likely become worthless.

If the price of Bitcoin remains above $23,000 at 8:00 UTC on August 12, only $16 million of these put options will be available. This difference occurs because the right to sell Bitcoin at $23,000 is of no use if it is trading above that level at expiry.

The Bulls could pocket a profit of $150 million

Below are the four most likely scenarios based on the current price action. The number of option contracts available on August 12 for buy (bullish) and sell (bearish) instruments varies depending on the expiry price. The imbalance in favor of each side constitutes the theoretical gain:

  • Between $21,000 and $22,000: 70 calls versus 4,200 puts. The net result favors the bears by $90 million.
  • Between $22,000 and $24,000: 1,600 calls against 1,460 puts. The bottom line is balanced between bulls and bears.
  • Between $24,000 and $25,000: 3,700 calls against 120 puts. The net result favors the bulls by 90 million.
  • Between $25,000 and $26,000: 5,900 calls against 30 puts. The bulls increase their earnings to $150 million.

This raw estimate considers call options used in bullish bets and put options exclusively in neutral to bearish trades. Even so, this oversimplification fails to account for more complex investment strategies.

Related: Bitcoin Braces for US Inflation Data as CPI Nerves Halt BTC Price Gains

Futures markets show bulls less likely to show strength

Bitcoin bears need to pressure the price below $24,000 on August 12 to balance the scales and avoid a potential loss of $150 million. However, Bitcoin bulls got $265 million in leveraged long positions liquidated between August 8 and August 9, so they are less inclined to push the price higher in the short term.

That said, the most likely scenario for August 12 is the $22,000-$24,000 range, offering a balanced outcome between bulls and bears. Given Bitcoin’s 50% year-to-date negative performance, even a small $90 million win for the bulls could be considered a win, but that would require holding BTC above 24,000. dollars.

The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.