Bitcoin (BTC) price action has not been bullish despite a record high of $ 69,000 on November 10. Some argue that the downtrend formed 40 days ago is the dominant trend and $ 56,000 is the current resistance.
Bitcoin / USD price on FTX. Source: TradingView
The downward trend follows US regulatory scrutiny after a Nov. 1 report from the president’s Financial Markets Working Group suggested that US stackcoin issuers should be subject to “appropriate federal supervision,” as banks and savings banks do.
On November 12, the US Securities and Exchange Commission rejected an application to establish a Bitcoin-backed foreign exchange trading fund. To justify the refusal, the regulator cited members’ inability to prevent fraud and market manipulation in bitcoin trading.
Recently, on November 23, the chair of the US Senate Banking, Housing and City Committee sent messages to several exchanges and issuers of stablecoin. Issues surrounding the protection of consumers and investors with stablecoins suggest that lawmakers can prepare for a hearing on the matter.
However, bulls may look at this type of news differently, since Bitcoin never needs stable coins to work. In addition, there is little the US government can do to suppress projects and developers who want to relocate outside their jurisdiction.
Bitcoin options that expire on November 26 are largely bullish
Despite a 17% decline in the last 14 days from an all-time high of $ 69,000, bitcoin call options dominate at the end of November 26.
Bitcoin Options collects open interest rates on November 26. Source: Bybt
On the surface, $ 1.9 billion puts (call) more than weekly maturities with 113% over $ 885 million puts (calls). But the buy-to-buy ratio of 2.13 is tricky as the latest fall is likely to erase 90% of the bullish rates.
For example, if the bitcoin price stays below $ 58,000 at 8:00 UTC on November 26, only $ 150 million in call options will be available after expiration. The right to buy bitcoin at a price of $ 60,000 or $ 70,000 has no value if it is traded at a lower price than that.
Bears can earn $ 365 million – $ 56,000.
Here are the four most likely scenarios based on current price action. For example, the data shows the number of contracts that will be available on November 26 for both bullish (call) and bearish (sell) instruments. The imbalance in favor of each side represents the theoretical merit:
Under $ 56,000: 720 calls against 7,490 puts. Net income favors $ 365 million in call options.
$ 56,000 to $ 58,000: 2,630 calls for 4,840 pips. The net result is USD 125 million in favor of the sale (sale) of instruments.
From $ 58,000 to $ 60,000: 3,600 calls for 3,850 points. The net result is balanced.
From $ 60,000 to $ 62,000: 6,180 calls for 2,340 points. The net result changes in favor of the future buyer (the bull) by 230 million dollars.
This estimate takes into account call options used in bullish rates and put options exclusively in neutral or bearish trades. However, the trader will sell the put option, and effectively get a negative bitcoin position above a certain price. Unfortunately, there is no easy way to assess this effect.
Bulls have a double incentive to defend $ 56,000
As the 40-day downtrend channel suggests, bulls need to keep the resistance level at $ 56,000 to avoid further loss of momentum. Remember that it took less than two weeks to get Bitcoin back from $ 41,500 to $ 56,000 on October 10th. Therefore, it is crucial to maintain this level to test the all-time high on November 10th.
Also, if the bulls manage to push the bitcoin price above $ 58,000, it will save them from a potential loss of $ 365 million if the BTC bears gain the upper hand among legislative winners. A fall of only 1.5% from the current level of $ 56,800 can give the bears enough confidence to cause even more pain.