Bitcoin (BTC) briefly broke above $24,000 on July 20, but the excitement lasted less than two hours after the resistance level proved more difficult than expected. The positive is that the high of $24,280 is a 28.5% increase from the July 13th low of $18,900.
According to Yahoo Finance, on July 19, Bank of America published its latest fund manager survey, with the headline “I’m Too Pessimistic, I’m Optimistic.” The report pointed to investor pessimism and expectations of weak corporate profits and stock allocations at their lowest level since September 2008.
The 4.6% advance on the heavy Nasdaq Composite between July 18-20 also provided necessary hope for bulls to take advantage of the July 22 weekly options expiration.
Global macroeconomic tensions subsided on July 20 after Russian President Vladimir Putin confirmed plans to rebuild the Nord Stream gas pipeline after the current maintenance period. However, within the past few months, data shows that Germany has reduced its dependence on Russian gas from 55% to 35% of its demand.
Bears place their bets at $21,000 or less
The open interest for the expiry of July 22 options is $540 million, but the actual number will be lower since the bears were surprised. These traders did not expect a 23% rise from July 13 to July 20 because their bets targeted $22,000 and below.
Bitcoin options collect open interest for July 22nd. Source: CoinGlass
The 1.09 buy-to-be ratio shows the balance between the open interest on demand (buy) of $280 million and the put (call) of $260 million. Currently, Bitcoin is standing near $23,500, which means that most bearish bets are likely to be worthless.
If the Bitcoin price remains above $22,000 at 8:00 AM UTC on July 22, only $30 million worth of put (sell) options will be available. This difference occurs because the right to sell Bitcoin at $22,000 is useless if BTC is trading above this level at expiration.
Bears aim for $24,000 to secure $235 million in profit
Here are the four most likely scenarios based on current price action. The number of options contracts available on July 22 for the buy (bull) and put (bear) instruments varies, depending on the expiration price. The imbalance in favor of each side constitutes the theoretical profit:
Between $20,000 and $21,000: 900 calls for 3,000 puts. The net result favors put (Bear) by $60 million.
Between $21,000 and $22,000: 2,400 calls versus 3,000 puts. The net result is balanced between bulls and bears.
$22,000-24,000: 6,600 calls for 500 puts. The net result favors buy-in (bull) instruments by $140 million.
Between $24,000 and $26,000: 9,400 calls for 0 puts. The bulls take full control, and bring in $235 million in profit.
This crude estimate takes into account the buy options used in bearish bets and the call options exclusively in neutral to bullish trades. However, this oversimplification overlooks more complex investment strategies.
For example, a trader could have sold a put option, effectively gaining positive exposure to bitcoin above a certain price, but unfortunately, there is no easy way to estimate this effect.
Related: Bitcoin Could Reach $120,000 In 2023, Trader Says With Bitcoin Price Rising 25% In Week
Bears have until Friday to turn things around
Bitcoin bears need to press the price below $22,000 on July 22 to avoid losing $140 million. On the other hand, the best-case scenario requires buyers to push a slight push above $24,000 to maximize their gains.
Bitcoin bears had $222 million of leveraged long positions liquidated from July 17-20, so they should have less margin required to push the price higher. In other words, the bulls have a head start to keep BTC above $22,000 before the July 22 options expire.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading movement involves risks. You should do your research when making a decision.