$1.48B in Bitcoin options expire on Friday — Will BTC hold $22K?

Bitcoin traders’ sentiment improved after indicators pointing to decrease inflationary strain advised that the U.S. Federal Reserve might quickly transfer away from its rate of interest enhance and quantitative tightening. Generally referred to as a pivot, the development change would profit threat belongings resembling cryptocurrencies.

On Jan. 22, the China-based peer-to-peer trades of USD Coin (USDC) reached a 3.5% premium versus the USA greenback, indicating reasonable FOMO by retail traders. This degree is the very best in additional than 6 months, suggesting extreme cryptocurrency shopping for demand has pressured the indicator above honest worth.

The all-time excessive on the 7-day Bitcoin hash fee — an estimate of processing energy devoted to mining — additionally supported the bullish momentum. The indicator peaked at 276.9 exo-hash per second (EH/s) on Jan. 19, signaling a reversion of the latest weak spot attributable to miners facing financial difficulties.

Regardless of the bears’ finest efforts, Bitcoin has been buying and selling above $20,000 since Jan. 14 — a motion that explains why the $1.48 billion Bitcoin month-to-month choices expiry will vastly profit bulls regardless of the latest failure to interrupt the $23,200 resistance.

Bulls had been too optimistic, however stay properly positioned

Bitcoin’s newest rally on Jan. 20 caught bears without warning, as a mere 6% of the put (promote) choices for the month-to-month expiry have been positioned above $22,000. Thus, bulls are higher positioned regardless that they set almost 40% of their name (purchase) choices at $23,000 or larger.

Bitcoin choices mixture open curiosity for Nov. 25. Supply: CoinGlass

A broader view utilizing the 1.15 call-to-put ratio reveals extra bullish bets as a result of the decision (purchase) open curiosity stands at $790 million towards the $680 million put (promote) choices. However, most bearish bets will doubtless change into nugatory as Bitcoin is up 36% in January.

If Bitcoin’s worth stays above $22,000 at 8:00 am UTC on Jan. 27, solely $38 million value of those put (promote) choices will probably be out there. This distinction occurs as a result of there isn’t a use in the appropriate to promote Bitcoin at $21,000 or $22,000 if it trades larger on expiry.

Bears might safe a $595 million revenue

Under are the 4 most probably eventualities primarily based on the present worth motion. The variety of choices contracts out there on Jan. 27 for name (bull) and put (bear) devices varies, relying on the expiry worth. The imbalance favoring all sides constitutes the theoretical revenue:

  • Between $20,000 and $21,000: 12,800 calls vs. 7,100 places. The web outcome favors bulls by $115 million.
  • Between $21,000 and $22,000: 17,600 calls vs. 2,800 places. The web outcome favors bulls by $320 million.
  • Between $22,000 and $23,000: 21,200 calls vs. 1,100 places. Bulls stay in management, profiting $455 million.
  • Between $23,000 and $24,000: 25,300 calls vs. 0 places. Bulls utterly dominate the expiry, racking up $595 million.

This crude estimate considers the decision choices utilized in bullish bets and the put choices solely in neutral-to-bearish trades. Even so, this oversimplification disregards extra complicated funding methods.

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Bitcoin bears have to push the value beneath $21,000 on Jan. 27 to vastly cut back their losses. Nonetheless, Bitcoin bears just lately had $335 million value of liquidated leveraged quick futures positions, in order that they doubtless have much less margin required to exert energy within the quick time period.

Consequently, essentially the most possible state of affairs for the January month-to-month BTC choices expiry is the $22,000 or larger degree, offering a good win for bulls.

Bitcoin (BTC) worth confronted fierce resistance at $23,000 after an 11% rally on Jan. 20, however that was sufficient to trigger $335 million in liquidations for brief positions utilizing futures contracts. The 36% year-to-date achieve to $22,500 induced bears to be ill-prepared for the $1.48 billion month-to-month choices expiry on Jan. 27.