Bitcoin bulls target $ 50,000 as $ 655 million BTC options expire on Friday

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Bitcoin (BTC) failed to break through the critical psychological barrier of $ 50,000 on August 23 and has since retested the $ 47,000 support. While historical data plays a role in the price of Bitcoin, September has performed negatively in 4 of the previous 5 years.

Cointelegraph contributor and market analyst Michal van de Poppe recently said that the breakout of Ether (ETH) above $ 3,500 could be a leading indicator of Bitcoin’s next bull run, and now that Ether is trading at $ 3,700, traders are eagerly awaiting the next BTC move.

Bulls might be excited about El Salvador’s “Bitcoin Law”, which is expected to go into effect on September 7. In addition, the recent approval of the $ 150 million Bitcoin Trust fund by the country’s legislature is another potentially bullish development.

The money will be used to support the installation of government-backed crypto ATMs and to offer incentives that encourage adoption of Chivo, the government-backed digital wallet.

This week, Coinbase also saw a significant outflow from Bitcoin after a relatively stable period. The move brought the exchange’s balance below 700,000 BTC, a figure last seen in December 2017. These moves are generally considered bullish because they signal that holders are less likely to sell coins in the short term. .

Bitcoin options accumulate open interest for September 3. Source: Bybt.com

The September 3 expiration will be a test of strength for the bulls, as 93% of the $ 390 million call (call) options were placed at $ 48,000 or more.

In addition, these neutral to bullish instruments dominate the weekly expiration by 48% against the protective put of $ 265 million.

However, the call-to-put ratio of 1.48 is misleading as the excessive optimism seen in bulls could wipe out most of their bets if the price of Bitcoin stays below $ 48,000 at 8:00 UTC on Friday. After all, what’s the point of a right to acquire Bitcoin at $ 52,000 if it is trading below that price?

The bears were also taken by surprise

78% of the put options, where the buyer has the right to sell Bitcoin at a predetermined price, were placed at $ 46,000 or less. These neutral to bearish instruments will become worthless if Bitcoin trades above this price on Friday morning.

Below are the four most likely scenarios that take into account current price levels. The imbalance in favor of each side represents the potential profit from the expiration.

Between $ 45,000 and $ 46,000: 140 call options against 1,220 put options. The net result is $ 48 million in favor of protective put (bear) instruments. Between $ 46,000 and $ 48,000: 590 calls against 735 puts. The net result is balanced between bears and bulls. Between $ 48,000 and $ 50,000: 1,930 calls against 120 puts. The net result is $ 88 million in favor of call options (bull). Above $ 50,000: 3,310 calls against 0 puts. The net result is complete dominance with $ 165 million in bullish instruments.

The data above shows how many contracts will be available on Friday, based on the expiration price.

This raw estimate considers call (call) options used in bullish strategies, while put (put) options exclusively in neutral to bearish trades. Unfortunately, real life is not that simple as it is possible that more complex investment strategies will be deployed.

For example, a trader could have sold a put option, thereby gaining positive exposure to Bitcoin above a specific price. Still, there is no easy way to measure this effect, so the simple analysis above is the best estimate.

Incentives are in place for bulls to attempt to break $ 50,000

These two competing forces will show their strength and the ears will try to minimize the damage. On the other hand, the bulls have modest control over the situation if the price of BTC stays above $ 48,000.

The most important test will be the $ 50,000 level, as the bulls have a strong incentive to wipe out every protective put and gain a $ 165 million advantage.

The bear’s only hope lies in surprise regulatory news or a negative outcome for the price of Bitcoin from US unemployment claim data on September 2.

While there is still room for additional volatility before the expiration, the bulls seem to be better positioned.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trade move involves risk. You should do your own research before making a decision.

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