Bitcoin (BTC )’s 90% increase so far this year has been largely driven by the SEC’s recent approval from the SEC’s exchange-traded fund (ETF). And in the first 48 hours of trading, the ProShares Bitcoin Stategy FT ($ BITO) built $ 1.1 billion in assets under management.
November 1st, the U.S. Treasury Department released its report on stablecoins, which essentially called on Congress to regulate the industry. In short, the task force expects government agencies to require stablecoin issuers to meet the same standards as insured custodians.
Although the consequences of a possible regulation of stablecoins on the cryptocurrency markets are unknown, stablecoins are crucial for exchanges, market makers and retail investors in their search for protection.. Even so, investors should be aware of the possibility that stablecoin issuers will react by simply moving their business out of US jurisdiction.
With less than 12 hours to go before the $ 1.15 billion options expire on Friday, Bitcoin is in a descending channel and facing resistance at the $ 62,000 to $ 63,000 level.
The expectation of the ETF may have been the reason for the bulls’ exaggerated optimism, which can be seen in the stakes of $ 68,000 and higher for the November 5th expiration. Even with $ 740 million in call options, the bulls could have missed some relevant profits.
At a glance, BTC’s 11,215 call options dominate the weekly expiration time by 82% compared to 6,146 put options. Still, the 1.82 ratio is misleading as some of these prices now appear excessive.
For example, If Bitcoin’s price is above $ 60,000 at 8:00 a.m. UTC on November 5th, only $ 70 million of the $ 405 million in put options will be available when it expires. There is no value in having the right to sell Bitcoin for $ 55,000 when it trades above that price.
It takes bears less than $ 62,000 to balance the scales
Below are the four most likely scenarios for the $ 1.15 billion maturity on November 5th. The imbalance that favors both sides represents the theoretical benefit. In other words, depending on the expiry price, the number of activated call (buy) and put (sell) contracts varies:
- Between $ 58,000 and $ 60,000: 270 call options vs. 1,800 put options. Net income favors put instruments (bearish) in USD 90 million.
- Between $ 60,000 and $ 62,000: 630 call options versus 350 put options. The net result favors put instruments (bearish) by USD 15 million.
- Between $ 62,000 and $ 64,000: 1,560 call options versus 370 put options. The net result is USD 75 million in favor of call (bull) instruments.
- Over $ 64,000: 2,890 calls vs. 100 put options. The net result is complete domination, with the cops making $ 175 million.
This gross estimate takes into account call options used in bullish strategies and put options used only in bearish neutral operations. However, a trader could have sold a put option to gain positive exposure to Bitcoin above a certain price. But unfortunately there is no easy way to gauge this effect.
The cops have a clear chance of winning $ 175 million
For now, Bitcoin’s price is hovering around $ 62,000 and there are incentives for bulls to push BTC up 3.5% to $ 64,000 before it expires on Friday. When this happens, your estimated earnings should increase by $ 100 million.
On the flip side, given Bitcoin’s 39% rally in October, bears would be more than pleased to suffer a loss of $ 15 million if BTC’s expiry price stays below $ 62,000.
Avoiding a $ 175 million profit from the bulls is the best scenario for the bears right now because during the bull runs, the effort a seller goes to to get the price hit is immense and generally ineffective.
The views and opinions expressed here are solely those of author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trade carries a risk, you must do your own research when making a decision.