Bitcoin (BTC) bulls cheered as the price rose to $ 69,000 on November 10, because the cumulative gain of 14.5% in five days meant that they had a profit of $ 715 million after the options expired on November 12.
However, the 9% negative price movement on November 16 surprised the bulls, especially since most of the stock options on November 19 were placed at $ 66,000 or higher. Oddly enough, this price level was the exception rather than the rule.
Bitcoin / USD price on FTX. Source: TradingView
Maybe the bears are lucky because two negative events have taken place in recent days. On November 12, the US Securities and Exchange Commission rejected VanEck’s spot application for a Bitcoin ETF. But more important than the rejection itself, which was generally expected, was the reasoning behind the decision.
The Securities and Exchange Commission has openly stated its suspicions about Stablecoin Tether (USDT) and its failure to prevent fraud and market manipulation in trading Bitcoin. Eric Balchonas, chief analyst at Bloomberg ETF and cryptocurrency expert, has already given a 1% chance of approval, so the rejection was not surprising.
On November 15, US President Joe Biden sanctioned an infrastructure law that states that transactions over $ 10,000 in digital assets will be reported to the IRS from 2024 onwards.
Given the aforementioned scenario, the bulls are likely to regret the absence of more conservative rates on November 19, when the $ 1.1 billion weekly options expire.
Bitcoin Options collects open interest rates for November 19. Source: Bybt
On the surface, a $ 630 million put option outperforms its weekly maturity by 35% compared to a $ 470 million put option. However, the buy-to-buy ratio of 1.35 is wise, as the recent price crash is likely to eliminate most bullish interest rates.
For example, if the bitcoin price stays below $ 62,000 at 8:00 UTC on November 19, only $ 68 million in call (buy) options will be available after expiration. For example, the right to buy bitcoin for $ 64,000 has no value if it is traded at a lower price than that.
Bjørner looks at prices below $ 60,000.
Listed below are the four most likely scenarios for the $ 1.1 billion expiration on November 19. The imbalance in favor of each side represents the theoretical gain. In other words, depending on the expiry price, the number of buy (buy) and sell (sell) contracts that become active varies:
$ 58,000 to $ 60,000: 10 calls for $ 3,840. Net income is $ 220 million in favor of the offer.
Between $ 60,000 and $ 62,000: 910 calls to 1950 puts. The net result is $ 60 million in favor of penalties (bears).
$ 62,000 to $ 64,000: 2030 requires 940 points. The net result is $ 70 million in favor of call options (bulls).
Over $ 64,000: 2,920 calls to 240 positions. The net result is $ 175 million in favor of Buying Instruments (Bull).
This estimate takes into account call options used in bullish rates and put options exclusively in neutral or bearish trades. However, this simplification overlooks more complex investment strategies.
For example, a trader can sell a put option, and effectively receive a positive share of bitcoins (BTC) over a certain price. Unfortunately, there is no easy way to assess this effect.
Bulls need a price increase of 6% to reverse the trend
The only way for the bulls to make a significant profit by the November 19 expiration date is to push the bitcoin price above $ 64,000, 6% below the current $ 60,400 price. If today’s negative sentiment prevails in the short term, the bears can put some pressure and try to earn up to 220 million dollars if the bitcoin price stays around 58,000 dollars.
At the moment, the data from the option markets gives a slight preference for short options, which reduces the chances of growth a little before 19 November.