Bitcoin (BTC) price plummeted to $15,500 on November 21, the lowest level in two years. The two-day correction resulted in an aggregate 8% downtrend and wiped out $230 million worth of leveraged long (buy) futures contracts.
This price move has given the bears the false impression that an expiration below $15,500 on the Dec. 9 options expiration is achievable, but those bets are likely to pay off as the deadline approaches. not in
Year-to-date, Bitcoin’s price is down 65% in 2022, while the leading cryptocurrencies are Meta Platform (META), Samsung (005930.KS) and Coca-Cola (Ko).
Investors’ main concern is the potential for a recession if the US Federal Reserve raises interest rates longer than expected. This comes from Dec. 2 data showing his 263,000 jobs were created in November, and that his Fed’s efforts to slow the economy and lower inflation are underway. is shown.
On December 7th, Wells Fargo Director Azhar Iqbal wrote: Note “On all counts, financial metrics point to a recession on the horizon,” he tells clients. “Given the inverted yield curve, the market is clearly preparing for a recession in 2023,” Iqbal added.
Bears are overly pessimistic and will suffer the consequences
Open interest for options expiring on Dec. 9 is $320 million, but the actual number is lower as bears expected price levels below $15,500. These traders became overconfident after Bitcoin fell below his $16,000 level on Nov. 22.
A call-to-put ratio of 1.19 reflects the imbalance between $175 million of call (buy) open interest and $145 million of put (sell) options. Bitcoin is currently at $16,900, meaning most bearish bets are likely worthless.
If the Bitcoin price remains close to $17,000 on December 9th at 8:00 AM UTC, these put options will only be available for $16 million. The difference is that if BTC trades above that level on expiry, the right to sell Bitcoin at $16,500 or $15,500 is useless.
Bulls Target $18,000 to Secure $130mn Profit
Below are the four most likely scenarios based on the current price action. The number of call (bullish) and put (bearish) option contracts available on December 9 depends on the expiry price. An imbalance in favor of both sides constitutes a theoretical gain.
- Between $15,500 and $16,500: 200 calls and 2,100 puts. The net result favors the put (bearish) stock by $30 million.
- $16,500 – $17,000: 1,700 calls versus 1,500 puts. The final result is balanced between bearish and bullish.
- $17,000 – $18,000: 5,500 calls versus 100 puts. The net result is a $100 million advantage for call (bullish) stocks.
- Between $18,000 and $18,500: 7,300 calls versus 0 puts. The bull has full control of expiry with his $130 million profit.
This rough estimate takes into account put options used in bearish bets and call options used in neutral to bullish trades only. Yet this oversimplification ignores more complex investment strategies.
For example, a trader could have sold a put option, effectively gaining positive exposure to Bitcoin above a certain price, but unfortunately there is no easy way to estimate this effect. .
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Bulls probably have less margin to support price
Bitcoin bulls need to push the price above $18,000 on Friday to secure potential gains of $130 million. On the other hand, in the bear’s best case scenario, he would have to dip just below $16,500 to maximize profits.
Bitcoin Bulls Had $230 Million Leveraged Long Positions liquidated As such, less margin is likely to be required to support the price.
Considering recession concerns and negative pressure from traditional markets from rising interest rates, bears are likely to avoid losses by keeping Bitcoin below $17,000 on Dec. 9.
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