Home CryptoMarket Bitcoin bears could face $440M loss in Friday’s options expiry

Bitcoin bears could face $440M loss in Friday’s options expiry

by CryptoFan
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Bitcoin (BTC)’s denial following its rise to $26,500 may look like a win for the bears, but March 14’s $24,750 was the highest daily close in nine months. Additionally, Bitcoin is up 26.5% since March 10, when the California Department of Financial Protection and Innovation shut down Silicon Valley Bank (SVB).

The recent rise in prices can be attributed to a variety of factors that have mitigated systemic risk for banks, including the extraordinary $25 billion financing by the Federal Reserve and the US Treasury on March 12th. Nonetheless, Bitcoin bulls could make a profit of up to $440 million when weekly options expire on March 17.

How Silicon Valley Bank Triggered a Stablecoin Bank Run

Prior to bankruptcy, SVB’s total assets exceeded $200 billion, ranking among the top 20 financial institutions in the United States. Nevertheless, the most direct impact on the cryptocurrency market was his $3.3 billion deposit from Circle’s USD Coin (USDC) stablecoin reserve. USDC net redemptions totaled $3 billion between March 13-15 after the stablecoin traded below par.

Signature Bank, which was shut down by the New York Financial Services Authority on March 12, has added to the negative pressure on the crypto market. However, Silvergate was more important to the crypto industry as it served many crypto-related businesses such as Coinbase, Celsius and Paxos.

The move may explain why Bitcoin’s $1.2 billion weekly options expiration on March 17 will almost certainly benefit the bulls. However, falling commodity prices, especially oil, can affect cryptocurrencies.

Crude oil hits lowest price since December 2021

Oil prices fell 10% from March 9 to 15, hitting the lowest level in more than a year amid fears that a credit crisis in the banking sector could trigger a recession and reduce oil demand. Did.

U.S. crude oil stockpiles rose by 1.6 million barrels last week, fueling the market’s bearishness, according to government data released on March 16.

If contagion fears spread to other markets, Bitcoin could struggle to sustain the price levels needed to earn over $360 million at option expiration on March 17. .

Bears made more bets, but mostly worthless

The open interest for options expiring on March 17 is $1.2 billion, but the real number is lower as bears focus their bets on bitcoin deals below $23,500.

Bitcoin Options aggregate open interest on March 17th.Source: Coin Glass

The difference between the $590 million call (buy) option and the $640 million put (sell) option open interest is reflected in the call-to-put ratio of 0.93. However, the expected outcome could be much lower as the bears were caught off-guard when Bitcoin price crossed him above $23,000 on March 13.

For example, if the Bitcoin price remains close to $24,500 on March 17th at 8:00 AM UTC, there are only $32 million put (sell) options available. This distinction arises because if BTC trades above that level at expiration, the right to sell Bitcoin at $23,000 or $24,000 will be voided.

RELATED: Blockchain Association seeks information from Fed, FDIC, and OCC on “de-banking” of cryptocurrency firms

The most likely outcome is in favor of the bull by a large margin

Below are the four most likely scenarios based on the current price action. The number of call (buy) and put (sell) option contracts available on March 17 depends on the expiry price. An imbalance in favor of both sides constitutes a theoretical gain.

  • $23,000 – $24,000: 9,900 calls versus 5,800 puts. The net result is a $100 million advantage on the call (buy) instrument.
  • $24,000 – $24,500: 11,400 calls versus 3,700 puts. The net result is $185 million in favor of the call product.
  • Between $24,500 and $25,500: 15,100 calls versus 700 puts. The bull increases his advantage to $360 million.
  • $25,500 – $26,000: 17,500 calls versus 300 puts. The Bulls’ advantage increases to his $440 million.

This approximation only considers call options for bullish bets and only put options for neutral to bearish trades. That said, this oversimplification leaves out more complex investment strategies.

For example, a trader could have sold a call option, effectively gaining negative exposure to Bitcoin above a certain price, but there is no easy way to estimate this effect.

To cut losses significantly, the bears need to push the price below $24,000 on March 17th. liquidation Leveraged short contract using futures from March 12th to 15th.

The views, thoughts and opinions expressed herein are those of the authors only and do not necessarily reflect or represent the views or opinions of Cointelegraph.