Bitcoin (BTC) bulls have good reason to celebrate the 22% increase in the last week. The price is moving towards $ 46,000, and to the surprise of many, the $ 43,000 level remains stable despite the volatility caused by US inflation data released on February 10.
On the macro side, sentiment was mixed. For example, retail turnover in the eurozone disappointed on 4 February, when the indicator showed a growth of 2.0% y / y against the forecast of 5.1%. While the number of US non-farm wages showed a sudden increase of 467,000 jobs.
Understandably, investors are increasingly concerned about corporate earnings despite stronger-than-expected economic growth in China and the United States. In recent weeks, some well-known companies have seen great success, including Meta (FB), Delivery Hero (DHER-DE) and Paypal (PYPL).
A 7.5% rise in the US CPI on February 10 is likely to raise Fed expectations of at least two rate hikes through 2022, and not many investors are seeking protection in government bonds as the five-year government yield is currently 1.9% .
Bitcoin is still a risky resource, but the price is falling
With the S&P 500 just 5% below the all-time high, Bitcoin’s recent strength should not come as a surprise. Oddly enough, put options dominate as the options expire on February 11, but the Bears were taken by surprise after bitcoin dropped above $ 43,000 this week.
Bitcoin options gather open interest rates on February 11th. Source: CoinGlass
A broader view using the buy-to-be ratio shows a 14% advantage for the Bitcoin bears because the $ 400 million call (buy) instrument has less open interest compared to the $ 460 million put (call). However, the buy indicator of 0.86 is misleading as most bearish games will be worthless.
For example, if the price of Bitcoin remains above $ 44,000 at 8:00 UTC on February 11, only $ 55 million put options will be available. This effect occurs because the right to sell Bitcoin for $ 40,000 has no value if it is traded above that level.
The Bulls want to make $ 300 million in profits
Here are the three most likely scenarios based on current price action. The number of option contracts available on 11 February for bulls and bears varies depending on the expiry price. The imbalance in favor of each side is the theoretical merit:
$ 42,000 to $ 44,000: 4,550 calls for 1,750 points. The net result is $ 120 million in favor of purchasing instruments (bullish).
$ 44,000 to $ 46,000: 6,380 calls for 860 points. The net profit in favor of the bulls is $ 250 million.
$ 46,000 to $ 48,000: 7,860 calls at 50 pips. Net result in favor of $ 350 million purchasing instruments (“bullish”).
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. But unfortunately, there is no easy way to evaluate this effect.
Related: Stablecoin Reserve Reaches $ 27 Billion When Bitcoin Rises Nearly $ 50,000 ‘Fair Value’
At best, the scenario remains tough
Bitcoin bulls need a small pump of over $ 46,000 to make $ 350 million on February 11th. On the other hand, at best, the bears would need a price drop of 4% from the current $ 45,600 to reduce losses to $ 120 million.
There is currently no reason for Bitcoin bears to add short positions given the latest weak business data. As such, the bulls should continue to show strength, pushing the price to $ 46,000 or higher during the expiration of the February 10 options.
A $ 350 million gain could be just what the bulls need to regain confidence and open long-term futures contracts, causing further upward pressure.