The price of Bitcoin has been gaining a lot of momentum as it nears $24,000, and this week’s options expiry may enable bulls to profit $200 million.
51 days have passed since Bitcoin (BTC) last closed above $24,000, making even the most bullish trader question whether a sustainable recovery is feasible. Nonetheless, despite the lackluster price actions, bulls seem to have the upper hand on August 5’s $510 million BTC options expiry.
The investors have been mitigating their risk exposure as the Federal Reserve keeps raising rates and unwinds its record $8.9 trillion balance sheet. As a result, the Bloomberg Commodity Index (BCOM) which measures price changes in natural gas, crude oil, gold, lean hogs, and corn, has traded down 9% within the same period.
Traders continue seeking protection through U.S. Treasuries and cash positions as San Francisco Fed President Mary Daly stated on August 2 that the central bank’s fight against inflation is quite ‘far from done’. With that said, the tighter monetary effect on inflation, employment levels, and the global economy are yet to be seen.
Bearish Bets Mostly Below $22,000
Bitcoin’s recovery above $22,000 on July 27 took the bears by surprise since only 28% of the put (sell) options for August 5 have been placed above such a price level. In the meantime, Bitcoin bulls might have been fooled by the $24,500 pump on July 30, as 59% of their bets lay above $25,000.
A wider view using the 1.60 call-to-put ratio indicates that more bullish bets are available since the call (buy) open interest stands at $315 million against the $195 million put (sell) options. Nonetheless, as Bitcoin now sits above $23,000, most bearish bets might become worthless.
For example, in case the price of Bitcoin remains above $23,000 at 8:00 am UTC on August 5, just $19 million worth of these put (sell) options will be available. The difference happens since there is no use in a right to sell Bitcoin at $22,000 or $20,000 in case it trades above that level at the time of expiry.
Bitcoin Bulls May Walk Away With A $200M Profit
Below are four of the most probable scenarios according to the current price action. The total number of options contracts available on August 5 for call (bull) and put (bear) instruments varies, subject to the expiry price. The imbalance favoring every side features the theoretical profit:
- Between $25,000 and $26,000: 0 calls vs. 7,900 puts. The bulls extend their gains to $200 million.
- From $24,000 to $25,000: 3,800 calls vs. 100 puts. In this case, the net result favors bulls to gain $90 million.
- Between $22,000 and $24,000: 1,400 calls versus 1,600 puts. In this scenario, the net result is balanced between call (buy) and put (sell) instruments.
- Between $20,000 and $22,000: 100 calls vs. 3,700 puts. The net result will favor the bears by $75 million.
The crude estimate considers the call options used in bullish bets and the put options exclusively in neutral-to-bearish trades. Also, the oversimplification disregards more complex investment strategies.
Buy Bitcoin NowBears Have Less Margin Needed To Overpower Bitcoin Price
The Bitcoin bulls need to push the price past $24,000 on August 5 to secure a $90 million profit. On the flip side, the bears’ best-case scenario needs pressure below $22,000 to set their gains at around $75 million.
Nevertheless, Bitcoin bears had $140 million leverage short positions liquidated on July 26-27, according to data from Coinglass. Subsequently, they have less margin needed to push the price lower in the near term.
The most possible scenario is a draw that will cause the Bitcoin price to range between $22,000 and $24,000 ahead of the August 5 options expiry.
