The $675 million worth of BTC options will expire on February 17, but bears may aim to take control by pushing the price of Bitcoin below $22,000.
It gained 6.3% two days after hitting $21,370 on February 13, its lowest level in more than three weeks. Prices rose again on February 14, with US consumer price index data showing inflation rose 6.4% in January from a year earlier.
As the US Federal Reserve continues to monitor the weak economy, interest rates are likely to rise to curb inflation. The unintended consequence is that rising government borrowing costs are favorable for hard assets such as commodities, stocks and cryptocurrencies.
The rise in the price of Bitcoin extinguished the bears’ expectations of an option above $21,500 on February 17, so their bets may not be close to expiring.
A major concern among Bitcoin investors is the additional regulatory implications after the US Securities and Exchange Commission ordered Kraken to freeze its rewards program and Binance USD on February 9.
stablecoin is released on February 13th.
Although the news flow remains negative, the bulls can take advantage of the February 17 option by keeping the BTC price above $22,500, but the situation could easily change and support the bears.
The bears did not expect the $22,000 level to hold
Open interest on options expiring on February 17 is $675 million, but the actual number will be lower as bears expect a price of $22,000. After bitcoin traded below $21,500 on February 13, these traders became overconfident.
A call ratio of 1.12 represents the difference between $355 million of call (buy) and $320 million of put (sell) options. If Bitcoin is around $22,700 at 8:00 UTC on February 17th, only $24 million of these put options will be available. The difference is that if BTC trades above this level after expiration, the right to sell Bitcoin at $21,000 or $22,000 is worthless.
The Bulls are targeting $23,000 to make $155 million
Below are four possible scenarios based on current price action. The number of call (bull) and put (bear) option contracts available on February 17 varies depending on the strike price. The inequality supporting the two sides constitutes the theoretical income:
Between $21,000 and $22,000: 700 calls versus 5,500 puts. Finally, put (bear) instruments support $100 million.
Between $22,000 and $22,500: 1,800 calls with 1,500 calls. The result is balanced between bears and bulls.
Between $22,500 and $23,000: 3,800 calls versus 1,100 calls. The result is $60 million in bell (bull) tool support.
Between $23,000 and $24,000: 6,900 calls against 200 calls. The result is $155 million in bell (bull) tool support.
This raw price includes call options used in crude bets and options traded only in neutral auctions. But this preference ignores more complex investment strategies.
For example, a trader may sell a call option that is negative on Bitcoin above a certain price, but unfortunately there is no easy way to assess this risk.
Related: Bitcoin Price at $23K Despite 6-Week High USD Strength
The bear can benefit from the effects of the regulation
Bitcoin bulls need to break above $23,000 on February 17th to capture $155 million in profits. On the other hand, the bears’ best-case scenario requires a 3.5% drop from $22,000 to maximize their profits.
Given the negative pressure from regulators, the bears are well positioned to avoid a February 17 schedule change and a loss of $60 million or more.
More importantly, over the long term, the Federal Reserve has little room to slow the economy before interest rate hikes spiral out of control.
February 17 will feature an interesting trade-off between the short-term effects of a hostile cryptocurrency regulatory environment and Bitcoin’s long-term scarcity and anti-censorship benefits.
Two days after hitting $21,370 on February 13, the price rose 6.3%, the lowest level in more than three weeks. On February 14, the consumer price index in the United States rose again, showing that inflation increased by 6.4% in January compared to the previous year.