$1.48 Billion Bitcoin Options Expires Friday Will BTC Hold $22,000?

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Bitcoin investor sentiment improved after signals of easing inflationary pressure suggested that the US Federal Reserve may soon back away from its interest rate hike and quantitative tightening. Commonly referred to as a pivot, the change in trend would benefit risky assets such as cryptocurrencies.

On January 22, China-based peer-to-peer transactions on USD Coin (USDC) reached a 3.5% premium against the US dollar, indicating moderate FOMO by retail traders. This level is the highest in over 6 months, suggesting that excessive buying demand for cryptocurrency has pressured the indicator above its fair value.

The all-time high Bitcoin 7-day hash rate, an estimate of processing power dedicated to mining, also supported the bullish momentum. The indicator peaked at 276.9 exo-hashes per second (EH/s) on January 19, signaling a reversal of recent weakness caused by financially struggling miners.

Despite the best efforts of the bears, Bitcoin has been trading above $20,000 since Jan. 14, a move that explains why the monthly Bitcoin Options expiry of $1.48 billion will greatly benefit the bulls despite the failure. recent to break the resistance of $23,200.

Bulls were overly bullish, but remain well positioned

Bitcoin’s latest rally on January 20 surprised the bears, as only 6% of the put options for the monthly expiry were placed above $22,000. Thus, the bulls are better positioned even if they set nearly 40% of their call (call) options at $23,000 or higher.

Bitcoin options aggregate open interest for November 25. Source: CoinGlass

A broader view using the call-to-put ratio of 1.15 shows more bullish bets as call (buy) open interest stands at $790 million against put (sell) options of 680 millions of dollars. Nonetheless, most bearish bets will likely become worthless as Bitcoin rose 36% in January.

If the price of Bitcoin remains above $22,000 at 8:00 UTC on January 27, only $38 million of these put options will be available. This difference occurs because there is no point in the right to sell Bitcoin at $21,000 or $22,000 if it is trading higher at expiry.

Bears could make a profit of $595 million

Below are the four most likely scenarios based on the current price action. The number of option contracts available on January 27 for buy (bullish) and sell (bearish) instruments varies depending on the expiry price. The imbalance in favor of each side constitutes the theoretical gain:

Between $20,000 and $21,000: 12,800 calls against 7,100 puts. The net result favors the bulls of $115 million. Between $21,000 and $22,000: 17,600 calls versus 2,800 puts. The net result favors the bulls by $320 million. Between $22,000 and $23,000: 21,200 calls versus 1,100 puts. The bulls remain in control, taking advantage of $455 million. Between $23,000 and $24,000: 25,300 calls versus 0 puts. The bulls completely dominate the expiry, accumulating $595 million.

This raw estimate considers call options used in bullish bets and put options exclusively in neutral to bearish trades. Even so, this oversimplification fails to account for more complex investment strategies.

Related:Bitcoin Due to Upheaval Against Gold, Stocks as BTC Price Drops Below $22.5,000

Bitcoin bears need to push the price below $21,000 on January 27 to significantly cut their losses. However, Bitcoin bears recently had $335 million in leveraged liquidated short-term positions, so they likely have less room needed to exert their short-term power.

Therefore, the most likely scenario for the January monthly BTC options expiry is the $22,000 level or higher, providing a decent win for the bulls.

The price of Bitcoin (BTC) faced fierce resistance at $23,000 after rising 11% on January 20, but that was enough to result in $335 million in liquidations for short positions using futures. The 36% year-to-date gain to $22,500 left the bears ill-prepared for the January 27 monthly $1.48 billion options expiration.

The views, thoughts and opinions expressed herein are the sole authors and do not necessarily reflect or represent the views and opinions of Cointelegraph.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

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