Every time a new Bitcoin (BTC) high is formed, exaggerated expectations arise. This time it was no exception, as the price briefly approached $ 69,000 the night of November 9th.
Words are just words, so there are no losses from ups or downs, but in the options markets you have to pay to place these bets. For example, on November 10, the right to buy bitcoins (call option) is traded for $ 100,000 on December 31 at 0.022 BTC or $ 1,460. For this privilege, the investor pays an advance payment, which is also known as a premium.
Analysts and analysts are quick to express their $ 100,000 target after Bitcoin reached its highest monthly close ever. However, history has shown that short-term price calculations rarely work, and it does not matter if you are an anonymous Twitter person or a knowledgeable multi-million dollar cryptocurrency manager.
Bitcoin price estimates are often distant
Despite being a very successful venture capitalist, Tim Draper’s estimate of $ 250,000 for 2020 is down 88%. Even well-known banking analysts may be wrong as Citibank FX Wire has been stuck in the market since November 2020, when they pointed to a potential increase of 318,000 dollars in 2021. But 50 days before the end of the year, some of these prophecies may turn out to be correct, but most are still better than random numbers.
Perhaps the bears are looking at regulatory barriers, for example, Singapore was the last region to ban exchange services for cryptocurrency derivatives. Huobi Global announced on Tuesday that it will close the accounts of all users resident in Singapore by the end of March 2022. In September, the Thai Securities and Exchange Commission also recommended the revocation of Huobi’s local operating license.
An initial analysis based on open interest rates on buy (buy) and put (sell) options gives a balanced position of $ 1.3 billion with the option expiring on November 12.
Bitcoin Options collects open interest rates on November 12. Source: Bybt
At first glance, $ 630 million calls (calls) is more than $ 565 million at weekly expiration by only 12%.
However, the buy-to-long ratio of 1.12 is misleading as the recent rise is likely to wipe out most bearish interest rates. For example, if the bitcoin price stays above $ 66,000 at. 08:00 UTC on November 12, every single sales (selling) tool becomes almost useless. The right to sell Bitcoin for $ 58,000 or $ 62,000 has no value if it is traded above this price.
The Bulls can aim for a profit of $ 410 million in excess of $ 70,000.
Here are the four most likely scenarios for the final on November 12. An imbalance in favor of both sides represents a theoretical merit. In other words, depending on the expiry price, the active number of buy (buy) and sell (sell) contracts varies:
$ 64,000 to $ 66,000: 2,440 calls against 310 puts. The net result is $ 135 million in favor of Buying Instruments (Bull).
From $ 66,000 to $ 68,000: 3,430 calls at 50 points. The net result is $ 225 million in favor of Buying Instruments (Bull).
Between $ 68,000 and $ 70,000: 44,070 calls per 10 putter. The net result is $ 305 million in favor of Buying Instruments (Bull).
Over $ 70,000: 5,820 calls on 0 put. The net result is complete dominance with bulls earning $ 410 million.
This rough estimate assumes that call options are used exclusively for bullish games, while put options are neutral for bearish traders. This simplification ignores more complex investment strategies.
For example, a trader may sell a put option that effectively gets a positive bitcoin position above a certain price. Unfortunately, there is no easy way to assess this effect.
The bears’ best hopes turned out to be ineffective
After achieving 19% in 30 days, the bulls dominated the weekly expiration on 12 November. One factor that may be partly responsible for the move was the lack of negative impact on prices after the US House of Representatives passed the trillion-dollar infrastructure bill. The bill requires that all digital asset transactions over $ 10,000 be reported to the IRS.
Traders should keep in mind that even bearish news has little or no effect on the price during an upward trend. In addition, the bears’ efforts to push prices higher are usually ineffective.
The Bulls can take advantage of the current situation by raising BTC above $ 70,000, which will result in an additional $ 105 million in profits, bringing their total to more.
