While the past few months have been difficult for Bitcoin ( BTC ) bulls, they are not the only ones. Investors have sought protection in cash and inflation-protected bonds as a result of the tightening economic policy by the United States Federal Reserve.
Surging inflation and recession signs have caused the S&P 500 stock index to fall 19% over the past year. Gold, once considered a safe asset, is now trading at 20% below its peak.
A housing crisis could be feared due to the rising cost of a mortgage. The Fed raised interest rates in March. Since then, borrowing costs have risen and mortgage rates have reached multidecade highs.
Bitcoin bulls may still make $270 million profit despite the bearish sentiment.
Options worth $640 million expire Nov. 4
According to the Nov. 4, options expiry open interest, Bitcoin bears have concentrated their bets between $16,000-$20,000,000. Although these levels may seem grim right now, Bitcoin traded below $19,500 just two weeks ago.
Bitcoin options for Nov. 4 aggregate open interest Source: Coinglass
The $335-million put (sell), options seem to dominate the $305 million call (buy) instruments. However, the 0.92 call/put ratio doesn’t tell the whole story. The 7.5% BTC price pump, which began Oct. 21, has wiped out most bearish wagers.
The buyer can sell Bitcoin at a fixed price on Nov. 4 at 8:00 UTC. If the market trades at or above this price, then there is no benefit to holding that derivative contract. Its value will be zero.
If Bitcoin is above $20,000 by 8:00 UTC on Nov. 4, only $30,000,000 of the put (sell) options will remain available at expiry.
Bulls will fight for Bitcoin to be sent above $22,000
These are the most likely Friday options expiry scenarios. The theoretical profit is the ratio of each side to the other. The expiry price determines the amount of active call (buy) or put (sell) contracts.
- Between $19,000 to $20,000: 500 phone calls vs. 5,100 put. The net result favors the bear (put) instruments by $90 million.
- Between $20,000 to $21,000: 3300 calls vs. 1500 puts. The net result favors call (bull) instruments by $40 millions.
- Between $21,000 to $22,000: 7,500 Calls vs. 200 Puts. Bulls are favored by $155 millions.
- Between $22,000 to $23,000: 12,200 Calls vs. 0. Puts. Bulls have a dominant position and are able to make $270 million in profits.
This rough estimate includes call options in bullish bets, and put options in neutral-to bearish trades. This oversimplification ignores complex investment strategies.
Bears require a win with a minimum of $20,000
Bitcoin bears can make $90 million by securing a 3% price drop from the $20,500 level to ensure a profit of $90 million on Nov. 4. These traders, however, have been subject to a $780million liquidation in futures contract contracts between Oct. 24, and Oct. 28, which could limit their ability to subdue bulls’ upward pressure.
To win, Bitcoin bears must be able to take advantage of short-term headwinds that are triggered by tighter macroeconomic conditions.
Options market data favors call (buy) options even though a $270million profit seems remote for BTC bulls.
These views and opinions are the author’s and do not necessarily reflect those of Cointelegraph.com. You should do your research before making any investment or trading decision.
