Bitcoin bulls risk losing $ 365 million in options forfeit this Friday

Bitcoin’s (BTC) price action was not bullish despite the all-time high of $ 69,000 on November 10th. Some argue that the descending channel formed 40 days ago is the dominant trend, with $ 56,000 marking its current resistance.

Price of the BTC / USD pair in FTX. Source: TradingView

This downward trend occurs after A November 1 report by the President’s Task Force on Financial Markets suggested that stablecoin issuers in the United States should be subject to “adequate federal supervision.” similar to banks and savings banks.

On November 12th The US Securities and Exchange Commission has rejected the application for a Bitcoin Spot Exchange Traded Fund (ETF). To justify the decision, the regulatory authority cited the inability of its participants to prevent fraud and market manipulation when trading Bitcoin.

Bitcoin bulls risk losing $ 365 million in options forfeit this Friday
Bitcoin bulls risk losing $ 365 million in options forfeit this Friday

Last, on 11/23 The chairman of the U.S. Senate Committee on Banking, Housing, and Urban Development sent notices to multiple exchanges and stablecoin issuers. Questions about consumer and investor protection in the stablecoin market suggest that lawmakers may be preparing a hearing on the matter.

The cops might have a different opinion on this news, however, as stablecoins are not necessary at all for Bitcoin to work. In addition, there is not much the US government can do to suppress projects and developers willing to leave their jurisdiction.

Bitcoin options tend to be bullish for the Friday expiration date

Despite the 17% retracement over the past 14 days from the all-time high of USD 69,000, Bitcoin call options dominate on Friday by a large majority.

Open interest in Bitcoin options added for November 26th. Source: Bybt

At a glance, call options of 1.9 billion dominate. But the call / put ratio of 2.13 is misleading as the recent drop is likely to eliminate 90% of bullish bets.

For example, if the price of Bitcoin stays below $ 58,000 at 8:00 a.m. UTC on November 26th, only $ 150 million of those call options will expire. The right to buy Bitcoin for $ 60,000 or $ 70,000 has no value if it trades below that price.

Bears can make $ 365 million in profit under $ 56,000

Here are the four most likely scenarios based on the current price movement. For example, the data shows how many contracts will be available on Friday for bullish (call) and bearish (put) instruments. The imbalance favoring each side represents the hypothetical gain:

  • Under $ 56,000: 720 call options vs. 7,490 put options. The net result favored bearish options (put) by USD 365 million.
  • Between $ 56,000 and $ 58,000: 2,630 call options versus 4,840 put options. The net result is USD 125 million in favor of bearish instruments (put).
  • Between $ 58,000 and $ 60,000: 3,600 call options vs. 3,850 put options. The net result is balanced.
  • Between $ 60,000 and $ 62,000: 6,180 call options versus 2,340 put options. Net income shifts in favor of purchase instruments (bullish) by USD 230 million.

This gross estimate takes into account call options used in bullish bets and put options only in neutral to bearish operations. However, a trader could have sold a call option, which would effectively have given them negative exposure to Bitcoin above a certain price. Unfortunately, there is no easy way to gauge this effect.

Cops have a double incentive to defend $ 56,000

As the 40-day descending channel shows, the bulls will need to hold the resistance at $ 56,000 in order not to lose any further momentum. Keep in mind that on October 10, it took Bitcoin less than two weeks to jump from $ 41,500 to $ 56,000. Maintaining this level is therefore crucial to confirm the all-time high of November 10th.

On the flip side, if the cops manage to push the price of Bitcoin above $ 58,000, it will save them from a possible loss of $ 365 million if the BTC bears prevail due to regulatory winds. A drop of just 1.5% from the current $ 56,800 could give the bears enough confidence to cause even more pain.

The views and opinions expressed here are solely those of author and do not necessarily reflect the views of Every investment and trade move involves risk, you will need to do your own research when making a decision.

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