Bitcoin bulls (BTC) are still licking their wounds after a bloody correction on December 4, which saw the price drop from $ 57,000 to $ 42,000. That 26.5% decline resulted in the liquidation of $ 850 million in long BTC futures, but more importantly, it moved the Fear and Greed Index to its lowest level since July 21.
Bitcoin / USD price in FTX. Source: TradingView
It’s a bit odd to compare the two, as the July 21st low of less than $ 30,000 would have wiped out all 2021 revenues. Meanwhile, the lower $ 42,000 since Dec 4 still represents a 44% gain. This year. Compare that to the S&P 500, which is up 21% in 2021, and the price of WTI, which is up 41%.
The bulls could focus on the stocks of bitcoins on the exchanges, which continue to decline and are currently at their lowest level in three years. According to CryptoQuant, there are currently less than 2.27 million BTC stored on exchanges and there are fewer coins available for trading signals that investors are reluctant to sell in the short term. This is a dynamic that many investors see as optimistic.
Even with the apparent balance between buying (buying) and selling (selling) options at the end of Friday at $ 1.1 billion, the bears are in a better position after Bitcoin settled at just over $ 50,000.
Bitcoin Options collects open interest rates on October 10th. Source: CoinGlass
A broader view using purchasing power ratios shows a modest 7% advantage for bitcoin speculators, as the $ 555 million buy (buy) instrument has more open interest compared to the $ 520 million put and call. However, the 1.07 index is misleading because the 11.5% drop in prices over the past week has rendered most bullish games useless.
For example, if the bitcoin price stays below $ 52,000 at 08:00 UTC on December 10, only $ 50 million of these call (buy) options will be available. This effect arises from the fact that the right to buy bitcoin for $ 55,000 has no value if it is trading at a price below that.
The numbers show that the bulls are at huge losses.
Here are the three most likely scenarios based on current price action. The number of options contracts available on Dec 10 for purchases and bears varies depending on the BTC expiration price. The disadvantage of each side is the theoretical advantage:
$ 47,000 to $ 50,000: 400 calls versus 6,600 puts. The net result is $ 300 million, which is in favor of bot tools (bears).
Between $ 50,000 and $ 54,000: 1,700 calls versus 4,700 puts. The net result is $ 160 million in favor of bot tools.
Over $ 54,000: 2,400 calls versus 2,900 puts. The net result is in favor of selling $ 30 million in options.
This approximation takes into account the buy options used in bullish play and put options, which are exclusively for neutral or bearish trades. However, this simplification overlooks more complex investment strategies.
For example, a trader might sell a put option, effectively reaching a negative risk on bitcoin above a certain price. Unfortunately, there is no easy way to calculate this effect.
The bears will do their best to keep BTC below $ 50,000.
Bitcoin bears need a good rally below $ 50,000 to make a $ 300 million profit. On the other hand, bulls will need a 7.2% price recovery from the current $ 50,500 to cut losses in half.
With the December 4 settlement of $ 2bn leveraged long positions, the bulls are likely to try to stay afloat and are reluctant to increase risk at this time. Optimistic investors would be unnecessarily wasteful of their efforts to save this short-term loss.
So, in this case, it looks like the bears are in control of the expiration of this weekly option.