Bitcoin carries the risk of losing money if the price of BTC stays above $ 50,000, and here is why

The 32% weekly increase in the price of Bitcoin (BTC) became the bears’ worst nightmare as the expiration date of the $ 860 million options on Friday approaches. After the $ 54,000 mark, probably more than 99% of bearish bets with put options are worthless.

The bears are in a dangerous position as Bloomberg’s Crypto Outlook found that Bitcoin’s $ 50,000 resistance was on the verge of turning into support. The leading commodities strategist Mike McGlone named factors such as increasing acceptance and falling supply on the stock exchanges.

Bloomberg noticed that too Concerns among traditional financial investors rose after US government default protection rose to its highest level in six years. In addition, one-year credit default swaps, i.e. the cost of hedging against late payment, have risen from 4 basis points to 27 basis points since mid-September.

Bitcoin price in Bitstamp in USD. Source: TradingView
Bitcoin carries the risk of losing money if the price of BTC stays above $ 50,000, and here is why
Bitcoin carries the risk of losing money if the price of BTC stays above $ 50,000, and here is why

Another key metric that undoubtedly fueled this week’s bull run was Bitcoin’s hash rate, the estimated computing power that supports network miners.. Capacity was hit hard in May when China vetoed the use of coal-based energy to mine cryptocurrencies. Then, in early June, the country decided to permanently ban cryptocurrency mining, temporarily putting many miners out of service, affecting the hash rate.

7-day average hash rate of Bitcoin in terahashes per second. Source: Blockchain.com

This week, the bulls took advantage of these favorable conditions and pushed Bitcoin to $ 55,000, its highest level since May 12th.. Regarding the expiration of the USD 860 million options on Friday, October 8th Bears need a miracle to bring the price below $ 50,000 to avoid significant losses.

Added open interest of Bitcoin options for October 8th. Source: Bybt

As the above data shows the bears were betting $ 400 million on the Friday expiration date, but it seems to have surprised them as 99% of the put options are likely worthless.

In other words, If Bitcoin price stays above $ 54,000 on Friday, only 2.7 million bearish neutral put options will be triggered on expiry. A right to sell (put option) Bitcoin for 50,000 US dollars is worthless if BTC trades above this price on Friday at 8:00 a.m. UTC.

Open interest is pretty much balanced between bullish and bearish

The call / put ratio of 1.16 represents the slight difference between the $ 465 million call options and the $ 400 million put options. While it favors the bulls, this broader view requires more detailed analysis as some bets are implausible given the current price.

Below are the four most likely scenarios for Friday’s expiration. The imbalance favoring one side or the other represents the theoretical benefit. The number of activated purchase and sale contracts varies depending on the expiry price:

  • Between $ 48,000 and $ 50,000: 3,515 calls versus 1,765 puts. The net result is USD 85 million in favor of purchase instruments (bullish).
  • Between $ 50,000 and $ 54,000: 6,270 call options versus 735 put options. The net result is USD 290 million in favor of purchase instruments (bullish).
  • Between $ 54,000 and $ 56,000: 6,930 call options versus 50 put options. The net result is USD 370 million in favor of purchase instruments (bullish).
  • Over $ 56,000: 7,600 calls versus 0 puts. The net result is total dominance with the cops making $ 425 million.

This gross estimate takes into account that call options are only used in bullish bets and put options in neutral or bearish operations.. However, investors could have used a more complex strategy, often with different expiration dates.

Bass players have been shipwrecked one way or another

In summary, the bulls have full control over the Friday expiration date and enough incentive to keep the price above $ 54,000. On the flip side, bears need a 10% negative move below $ 50,000 in order not to lose $ 370 million.

Nevertheless, Keep in mind that the effort it would take for a seller to liquidate long positions during an upward phase as Bitcoin is currently doing is immense and usually ineffective.. In a nutshell, if there are no surprises before October 8, Bitcoin should continue its rally towards higher prices.

The points of view and opinions expressed here are exclusively those of author and do not necessarily reflect the views of Cointelegraph. All investments and operations involve risks. When making a decision, you need to do your own research.

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