Bitcoin (BTC) bulls rose to defend the $ 40,000 level after a devastating retest of $ 38,000 support on March 7. The confidence and momentum that had built up earlier this month was suddenly shattered after BTC failed to break $ 44,500 for the third time. March 2.
The Bitcoin rally on March 9 is partly due to the US inflation report which is expected this week. Analysts predict another 40-year high as the consumer price index (CPI) reached an annual increase of 7.9%.
In addition, US Treasury Secretary Janet Yellen’s announcement regarding President Biden’s digital asset order was somewhat more moderate than expected. Although it was removed from the US Treasury Department’s website because it appeared to have been issued early by mistake, it appeared that the order required a “coordinated and comprehensive approach to digital asset policy.”
The increase in commodities was a warning of the Bitcoin rally
With the Bloomberg Commodity Index (BCOM) reaching an all-time high of 134 on March 8, Bitcoin’s recent strength should come as no surprise. Despite a correction to 129, BCOM’s 30-day cumulative gain remained at 18.5%, according to MarketWatch.
According to the interest that is open for option expiration on Friday, bitcoin speculators bet large between $ 44,000 and $ 48,000. These levels may seem bullish at the moment, but Bitcoin tested this level eight days ago.
Bitcoin options gather open interest rates on March 11. Source: CoinGlass
The broader view uses a buy-to-be ratio and shows a 40 percent advantage for speculators over bitcoin, as $ 460 million buy (buy) instruments have greater open interest compared to put (buy) options on $ 330 million. However, the call-to-put 1.40 indicator is misleading because most bullish games will be worthless.
For example, if the price of Bitcoin stays below $ 43,000 at At 8:00 UTC on March 11, only $ 190 million buy (buy) options will be available. This effect occurs because the right to buy Bitcoin for $ 44,000 has no value if it is traded below that level.
The Bulls can earn $ 140 million to $ 42,000.
Here are the three most likely scenarios based on current price action. The number of option contracts available on March 11 for bullish and bearish instruments depends on the expiration price. The imbalance in favor of each side is the theoretical merit:
$ 40,000 to $ 42,000: 2,600 calls for 2,100 points. Net income is balanced between buying (bullish) and selling (bearish) options.
$ 42,000 to $ 43,000: 4,500 calls for 1,150 points. The net profit in favor of the bulls is $ 140 million.
$ 43,000 to $ 44,000: 5,100 calls for 700 points. Net profit in favor of buying instruments (bullish) for $ 190 million.
This estimate takes into account call options used in bullish games and put options only in neutral or bearish trades. However, this oversimplification overlooks more complex investment strategies.
For example, a trader can sell a put option, and effectively take a negative risk on bitcoin above a certain price. Unfortunately, there is no easy way to evaluate this effect.
Bears need a BTC price below $ 42,000 to balance their weight
Bitcoin bulls must have $ 42,000 to earn $ 140 million on March 11th. Also, a price increase of just 2% from the current level of $ 42,200 is enough for Bitcoin speculators to earn $ 190 million when the options expire on Friday.
The bears will find it difficult to suppress the price, given the short-term positive sentiment on the inflation outlook and reduced pressure from regulators. Option market data currently favors call options (buy).
