The $ 3.2 billion bitcoin options expiration on Friday could start a new rally

Bitcoin (BTC) has been hovering in a descending channel pattern since its all-time high of $ 67,000 on October 20. This was just a day after the ProShares Bitcoin Strategy ETF (BITO) debuted on the Nasdaq.

Nevertheless, the bulls have a sufficient number of incentives to peg the price of bitcoin above $ 60,000 on October 29th. when the $ 3.2 billion monthly option expires.

Bitcoin price in USD (Coinbase). Source: TradingView

Investors currently have mixed feelings about the exchange-traded fund’s approval, despite having reached $ 1 billion in assets under management in 48 hours. Either market expectations for these funds were incredibly high, or the 42% increase in October would have already had an impact on the price.

The $ 3.2 billion bitcoin options expiration on Friday could start a new rally
The $ 3.2 billion bitcoin options expiration on Friday could start a new rally

Regulatory uncertainty in the US is also a key factor in keeping some large institutional investors out of the sector. At an October 26th hearing in the United States Senate Committee, Rostin Behnam, acting chairman of the Commodity Futures Trading Commission (CFTC) compared the government agency’s digital asset motion to a police officer on duty.

Behmann added:

“The market operations currently taking place are a large part of the risk posed by digital assets.”

The cops are betting on a possible profit of $ 715 million

Typically, these observations would have little or no impact in a bull market, begging the question of whether the 13% correction from the all-time high on October 20 marks the end of a positive cycle.

The monthly expiry on October 29th will be a test of strength for the bears, as any prize over $ 58,000 translates into a profit of $ 385 million or more for the bulls.

Added open interest for Bitcon options for October 29th. Source: Bybt

At a glance, $ 1.94 billion call instruments dominate the monthly maturity by 56% compared to $ 1.24 billion put options.

Nevertheless, the 1.56 call / put ratio is misleading as the bears have been taken by surprise and most of their options will lose their value if the price of Bitcoin stays above $ 58,000 at 8:00 a.m. UTC on October 29th.

Owning a put option, which has the right to sell Bitcoin for $ 55,000, is worthless when the price of BTC is trading above that level.

Bulls comfortably over $ 58,000

68% of the put options were opened at a price of USD 58,000 or less.

Below are the four most likely scenarios that take into account the current price level. In addition, the data shows how many contracts will be in play on October 29th for bullish (call) and bearish (put) instruments.

  • Between $ 52,000 and $ 55,000: 6,500 call options versus 6,530 put options. The net result is balanced between bullish and bearish.
  • Between $ 55,000 and $ 58,000: 9,510 call options versus 4,610 put options. The net result favors the cops by $ 270 million.
  • Between $ 58,000 and $ 60,000: 9,900 call options versus 3,490 put options. Net income continues to speak for the bulls at $ 385 million.
  • Over $ 60,000: 13,870 call options versus 1,970 put options. The bulls benefit from $ 715 million of the net result.

As shown above, the imbalance that favors both sides represents the hypothetical potential gain from decay.

This gross estimate takes into account the call options used in bullish strategies and the put options only in neutral or bearish operations. However, a trader could have sold a put option to gain positive exposure to Bitcoin above a certain price. Unfortunately, there is no effective way to gauge this effect.

Can the bears carry the price of Bitcoin under $ 55,000?

The bears need a 6% correction from the current price of $ 58,500 to avoid a loss of $ 270 million. While it doesn’t sound like much at first, traders should also consider the bullish momentum that the ETF’s approval brought with it.

With less than 36 hours of expiration on October 29, the bears will likely make a profit by keeping the price of Bitcoin above $ 59,000. As for the bears, less than $ 55,000 seems a long way off, but it might be worth it.

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

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