Here’s why the bears hope to pin Bitcoin below $ 60,000 before Friday’s $ 1.1 billion options expire

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Bitcoin Bulls (BTC) were in high spirits when the price shot up to $ 69,000 on November 10, as the 14.5% gain accrued over five days meant they were making a profit of $ 715 million when the prices expired. November 12 options.

However, the negative 9% price move on November 16 surprised the bulls, especially since most of the calls (calls) for November 19 were placed at $ 66,000 or more. Oddly enough, this price point has been the exception rather than the norm.

Bitcoin / USD price on FTX. Source: TradingView

The bears may have been lucky because both negative events have occurred in the past few days. On November 12, the United States Securities and Exchange Commission rejected VanEck’s Bitcoin Cash ETF application. But more important than the rejection itself, which was widely expected, was the rationale for the decision.

The SEC explicitly mentioned its uncertainties regarding Tether’s stablecoin (USDT) and the lack of ability to deter fraud and market manipulation in Bitcoin trading. Bloomberg’s senior ETF analyst and cryptocurrency expert Eric Balchunas had previously given a 1% chance of approval, so the denial was not much of a surprise.

Additionally, on November 15, US President Joe Biden sanctioned the Infrastructure Bill, which requires that from 2024, digital asset transactions valued at more than $ 10,000 be reported to the Internal Revenue Service.

Given the above scenario, the bulls will likely regret their lack of more conservative bets on the weekly $ 1.1 billion options expiration on November 19.

Bitcoin options accumulate open interest for November 19. Source: Bybt

At first glance, the $ 630 million call (call) options dominate the weekly expiration by 35% compared to the $ 470 million put (put) instrument. Still, the call-to-put ratio of 1.35 is misleading as the recent price crash will likely wipe out most bullish bets.

For example, if the price of Bitcoin remains below $ 62,000 at 8:00 a.m. UTC on November 19, only $ 68 million of those call (buy) options will be available upon expiration. For example, the right to buy Bitcoin at $ 64,000 has no value if it is trading below that price.

Bears set eyes on prices under $ 60,000

Below are the four most likely scenarios for the $ 1.1 billion expiration on November 19. The imbalance in favor of each side represents the theoretical profit. In other words, depending on the expiration price, the amount of buy (buy) and sell (sell) contracts that become active varies:

Between $ 58,000 and $ 60,000: 10 calls against 3,840 puts. The net result is $ 220 million in favor of put (bear) options. Between $ 60,000 and $ 62,000: 910 calls against 1,950 puts. Net income is $ 60 million in favor of put (bear) instruments. Between $ 62,000 and $ 64,000: 2,030 calls against 940 puts. The net result is $ 70 million in favor of call options (bull). Above $ 64,000: 2,920 calls against 240 puts. The net result is 175 million dollars in favor of call instruments (bull).

This raw estimate considers call options used in bullish bets and put options exclusively in neutral to bearish trades. However, this oversimplification ignores more complex investment strategies.

For example, a trader could have sold a put option, thereby gaining positive exposure to Bitcoin (BTC) above a specific price. But, unfortunately, there is no easy way to estimate this effect.

Bulls need 6% price hike to turn the tide

The only way for the bulls to profit a significant amount at the November 19 expiration is to push the price of Bitcoin above $ 64,000, which is 6% of the current $ 60,400. If the current negative short-term sentiment prevails, the bears could exert some pressure and try to make up to $ 220 million in profit if the price of Bitcoin stays closer to $ 58,000.

Currently, options market data is slightly favoring put (put) options, slightly reducing the chances of a rally before November 19.

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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