Over the last few months, Bitcoin (BTC) has followed a slightly bullish trend, and supported the support several times.
Although this may sound positive, Bitcoin’s performance to date is still weak at 14%. On the other hand, the Bloomberg Commodity Index (BCOM) is up 2% over the same period.
1 day bitcoin / usd candlestick chart. Source: Trading View
The broader commodity index was affected by higher prices for crude oil, natural gas, gold, maize and lean pigs. Deteriorating macroeconomic conditions put pressure on the supply curve, which in turn moved the equilibrium price to a higher level.
In addition, on March 15, the United States approved a $ 1.5 trillion spending bill that will fund the government through September. President Joe Biden’s signing of the law prevents a government shutdown, but it puts further pressure on US government debt, which now stands at more than $ 30.3 trillion.
However, cryptocurrency traders are increasingly concerned about the expected rise in interest rates from the US Federal Reserve through 2022 to limit inflationary pressures.
Investors profited on more risky assets, pushing the US Dollar Index (DXY) to a 21-month high of 99.2 on March 11. The index measures the strength of the dollar against a basket of major foreign currencies.
Bearish games are generally under $ 40,000.
Bitcoin’s recovery of over $ 40,000 on March 26 surprised the bears, as only 7% of bets on the bear option on March 18 were placed above this price level.
The Bulls may have been fooled by the latest $ 45,000 resistance test on March 1 as their $ 760 million option bet expiring on March 18 rose to $ 65,000.
Bitcoin options consolidate open interest rates on March 18. Source: CoinGlass
A broader view using a buy-to-buy ratio of 1.26 shows larger lots as $ 425 million in open interest on demand (buy) versus $ 335 million for put options. But with Bitcoin now back over $ 40K, most bearish games are likely to be worthless.
For example, if the bitcoin price stays above $ 40,000 at. 8:00 UTC on March 18, only $ 24 million put options and put options will be available. This difference arises because the right to sell Bitcoin for $ 40,000 is worthless if it is traded above this level at expiration.
The Bulls can earn $ 320 million
Here are the three most likely scenarios based on current price action. The number of option contracts available on March 18 for buy (bullish) and sell (bearish) instruments varies depending on the expiration price. The imbalance in favor of each side is the theoretical merit:
$ 38,000 to $ 40,000: 1,700 calls vs. 1,300 puts. The net result is a balance between buying (bullish) and selling (bearish).
$ 40,000 to $ 41,000: 3,200 calls vs. 600 puts. The net profit in favor of the bulls is 105 million dollars.
$ 41,000 to $ 42,000: 4,200 calls for 300 puts. Bulls’ profit increased to $ 160 million.
This approach takes into account the call options used in bullish games and the put options exclusively on neutral bearish trades. However, this oversimplification overlooks more complex investment strategies.
For example, a trader can sell a put option, and actually get a passive share of bitcoins above a certain price. Unfortunately, there is no easy way to assess this effect.
Related: Bitcoin risks “Bear Market Capitulation” when wealthy investors continue to sell Bitcoin – Analyst
Bjørner has incentives to suppress the Bitcoin price
Bitcoin Bears must push the price below $ 40,000 on March 18 to avoid losing $ 105 million. On the other hand, at best, a higher payment of $ 41,000 is required for the bulls to bring the profit up to $ 160 million.
Bitcoin bulls liquidated $ 98 million in leveraged long positions on March 16, so there is less incentive to push the price higher in the short term. That said, the bulls are likely to try to defend the $ 40,000 support before the options expire on March 18.