Bitcoin bulls risk losing $ 365 million when Friday’s BTC options expire


Bitcoin (BTC) price action has not been bullish despite the all-time high of $ 69,000 on November 10. Some argue that this downward channel formed 40 days ago is the dominant trend, and $ 56,000 is its current resistance.

BTC / USD price on FTX. Source: TradingView

Such a drop follows close scrutiny by US regulators, after a November 1 report by the President’s Financial Markets Task Force suggested that issuers of stablecoins in the United States should be subject to ” appropriate federal supervision “, similar to banks and savings associations.

On November 12, the application for Bitcoin-backed exchange-traded funds (ETFs) was rejected by the United States Securities and Exchange Commission. To justify the refusal, the regulator cited the lack of capacity of its participants to deter fraud and market manipulation in Bitcoin trading.

Most recently, on November 23, the chairman of the US Senate Committee on Banking, Housing and Urban Affairs sent notices to several exchanges and stablecoin issuers. Questions on consumer and investor protection on stablecoins suggest lawmakers could prepare for a hearing on the matter.

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Still, the bulls might have a different take on this news, as stablecoins are in no way necessary for Bitcoin to work. In addition, there is little the US government can do to suppress projects and developers wishing to relocate outside of its jurisdiction.

Bitcoin options are mostly bullish for Friday expiration

Despite falling 17% in the past 14 days from an all-time high of $ 69,000, Bitcoin’s call (call) options largely dominate Friday’s expiration.

Bitcoin options accumulate open interest for November 26. Source: Bybt

At first glance, the $ 1.9 billion in call (call) options dominate the weekly expiration by 113% versus the $ 885 million in put (put) instruments. But the call-to-put ratio of 2.13 is misleading as the recent drop will likely wipe out 90% of bullish bets.

For example, if the price of Bitcoin stays below $ 58,000 at 8:00 a.m. UTC on November 26, only $ 150 million of those call (buy) options will be available upon expiration. There is no value in the right to buy Bitcoin at $ 60,000 or $ 70,000 if it is trading below that price.

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Bears can earn $ 365 million under $ 56,000

Below are the four most likely scenarios based on the current price action. For example, the data shows how many contracts will be available on Friday for both bullish (call) and bearish (put) instruments. The imbalance in favor of each side represents the theoretical gain:

  • Below $ 56,000: 720 calls against 7,490 puts. Net income favors bear (put) options of $ 365 million.
  • Between $ 56,000 and $ 58,000: 2,630 calls versus 4,840 put options. The net result is $ 125 million in favor of bearish instruments (put).
  • Between $ 58,000 and $ 60,000: 3,600 calls against 3,850 put options. The net result is balanced.
  • Between $ 60,000 and $ 62,000: 6,180 calls against 2,340 put options. The net result moves in favor of call instruments (bull) of 230 million dollars.

This raw estimate considers call options used in bullish bets and put options exclusively in neutral to bearish trades. However, a trader could have sold a call option, thereby gaining negative exposure to Bitcoin above a specific price. Unfortunately, there is no easy way to estimate this effect.

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Bulls Have Twice the Incentives to Defend $ 56,000

As the 40-day descending channel indicates, the bulls need to hold the resistance of $ 56,000 to avoid losing further momentum. Keep in mind that it took less than two weeks to bring Bitcoin down from $ 41,500 to $ 56,000 on October 10. Therefore, maintaining this level is crucial to validate the November 10 record.

Moreover, if the bulls manage to push the price of Bitcoin above $ 58,000, it will save them a potential loss of $ 365 million if the BTC bears get the upper hand on the backs of regulatory winds. A mere 1.5% drop from the current $ 56,800 could give bears just enough confidence to instill even more pain.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of TUSEN. Every investment and trade move involves risk. You should do your own research before making a decision.