Bitcoin (BTC) fell this week and of course bears will always find a reversal signal every time price shows strength, such as an 8% gain on November 28th. Of course, technical analysis is not an exact science, so there is some margin for interpretation, and most traders look to multiple time frames to find a narrative that fits their biases.
The price of BTC is currently in a downward channel that started on October 31st, and if this pattern plays out, Bitcoin could drop to $ 50,000 in the short term.
Bitcoin / USD price on FTX. Source: TradingView
Cryptocurrency markets crashed on November 26 after fears over a new COVID-19 variable led to global sales. When the bitcoin price fell below $ 54,000, the bears saw a potential profit of $ 215 million after the options expired on December 3, but this changed after the bitcoin price returned support at $ 57,000.
Moreover, concerns from US regulators continue to drive the market. On November 24, the chairman of the US Senate Banking Committee requested information from stablecoin issuers and exchanges by December 3.
In early November, the president’s working group on financial markets released a report proposing that US stablecoin issuers be subject to “appropriate federal oversight” similar to what banks require.
Given the possible government intervention and negative short-term impact, the bears are likely to earn $ 80 million in bitcoin when the options expire on December 3rd.
Bitcoin Options collects open interest rates on December 3rd. Source: Coinglass.com
On the surface, $ 460 million calls are similar to $ 485 million short, but the buy-to-buy ratio of 0.96 is misleading as a 17 percent price cut from $ 69,000 would likely wipe out most of them. bullish rates.
For example, if the bitcoin price stays below $ 57,000 at 0800 UTC on December 3, only $ 24 million will be available after these buy (buy) options expire. Consequently, the right to buy bitcoin for $ 60,000 has no value if it is trading at a price lower than that.
Bears are comfortable with bitcoins below $ 57,000
Here are the four most likely scenarios for the $ 950M options expiring on December 3rd. An imbalance in favor of each side is a theoretical advantage. In other words, depending on the expiration price, the number of call (buy) and put (sell) contracts that become active varies:
From $ 54,000 to $ 56,000: 290 calls for 3480 points. The net result is $ 175 million including put options.
From $ 56,000 to $ 58,000: 750 orders for 2,160 positions. The net result is $ 80 million, which is in favor of bot tools (bears).
$ 58,000 to $ 60,000: 1,510 calls for 1,040 pips. The net result is $ 30 million, which is in line with call options (bullish).
Over $ 60,000: 2760 calls versus 860 puts. The net result is $ 115 million, which is in line with buy-in instruments (bullish).
This is a rough estimate that buy options are used in bullish play and sell options are used exclusively in neutral or bearish trades. However, this simplification overlooks more complex investment strategies.
For example, a trader might sell a put option after actually reaching a positive Bitcoin (BTC) position above a certain price. Unfortunately, there is no easy way to calculate this effect.
Bulls need $ 58,000 or more to balance their weight.
The only way for the bulls to avoid losses by the end of December 3 is to raise the bitcoin price above $ 58,000, down 2% from the current $ 56,900. But if current negative sentiment prevails in the short term, the bears may put some pressure and try to make up to $ 175 million in profits if the bitcoin price stays below $ 56,000.
The market data for options currently favors puts (calls) to some extent, which creates opportunities for further research and development and sudden market crashes.