Bitcoin bulls stand to win the $1 billion option that expires this week, but the market’s post-FOMC reaction could change their plans.
Bitcoin
Bitcoin
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$22,372
The price has been trading above $22,500 for 12 days. Of course, this could change, even if Federal Reserve Chairman Jerome Powell makes positive statements about the economy in today’s post-FOMC statement.
Even if the decision aligns with market consensus, the post-meeting statement should be the primary focus of investors. Specific areas of focus will be clues for his upcoming March conference.
Worrying news about the largest stablecoin, Tether (USDT), is also big after bankruptcy examiner Celsius reported in September 2021 that “Tether’s exposure finally exceeded $2 billion.” can affect. The issuer of Tether suffered a loss. Paolo Ardoino, chief technology officer at iFinex, denied exposure to Celsius and suggested investigators “mixed up” prefixes in the report.
Is a major stock market correction coming?
Known for being one of his most outspoken critics of his 2008 subprime mortgage crisis from 2007 to 2008, his legendary portfolio manager Michael Barry said on Twitter, Feb. The investor posted a brief note suggesting a “sell”.
While there is no basis for this message, we can conclude that Burry expects a significant correction in traditional markets. Considering his 75% correlation over his 40 days between Bitcoin and the S&P 500 index, the potential for a BTC price retracement becomes clear.
As a result, his February 3rd expiration of his $1 billion BTC option this week could see the bears turn the tables even if the current tide is in favor of the bulls. So it can go either way.
Bitcoin Bears Caught Completely Off-guard
The open interest at option expiry on Feb. 3 is $1 billion, but the real number is this, as the bears were caught off-guard after Jan. 20 to Jan. 21, when he was up 9.6%. will be lower than
A call-to-put ratio of 1.61 reflects the imbalance between the $640 million open interest call (buy) and his $400 million put (sell) option.
If the price of Bitcoin is above $23,000 on February 3rd at 8:00 UTC, his less than $7 million of these put options will become available. This difference is because at expiry he has no right to sell Bitcoin at $22,000 or $23,000 if BTC trades above that level.
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$23,000 Bitcoin Gives Bulls $180 Million Profit
Below are his three most likely scenarios based on the current price action. The number of call (bullish) and put (bearish) option contracts available on February 3 depends on the expiry price. An imbalance in favor of both sides constitutes a theoretical gain.
$21,000 to $22,000: Call 2,700 vs Put 10,700. Net income favors put (bearish) products by $165 million.
Between $22,000 and $23,000: 4,400 calls vs. 4,200 puts. The end result is a balance between call and put options.
Between $23,000 and $24,000: 7,800 calls and 100 puts. The final result is a $180 million advantage on the call product (bullish).
Between $24,000 and $25,000: 12,400 calls to 0 puts. The Bulls extended earnings to his $300 million.
This rough estimate takes into account call options used in bullish bets and put options used only in neutral to bearish trades. Yet this oversimplification ignores more complex investment strategies.
For example, a trader could have sold a call option, effectively gaining negative exposure to Bitcoin above a certain price, but unfortunately there is no easy way to estimate this effect.
Essentially, the Bitcoin bear needs to push the price below his $22,000 mark on Feb. 3 to turn the tables and secure a profit of $165 million. But for now, the bulls can profit from the weekly BTC option expiry and use the proceeds to further defend the $23,000 support.
