Data shows Bitcoin traders’ neutral view ahead of Friday’s $750M BTC options expiry

Bitcoin
(BTC)
has
bounced
11%
from
the
$39,650
low
hit
on
Jan.
10
and,
currently,
the
price
is
battling
with
the
$44,000
level.
There
are
multiple
explanations
for
the
recent
weakness,
but
none
of
them
seem
sufficient
enough
to
justify
the
42%
correction
that
took
place
since
the
Nov.
10
all-time
high
at
$69,000.

At
the
time
(Nov.
12),
negative
remarks
from
the
U.S.
Securities
and
Exchange
Commission
(SEC)
were
issued
at
the
rejection
of
VanEck’s
physical
Bitcoin

exchange-traded
fund
(ETF)
.
The
regulatory
body
cited
the

inability
to
avoid
market
manipulation

due
to
unregulated
exchanges
and
heavy
trading
volume
based
on
Tether’s
(USDT)
stablecoin.

Then,
on
Dec.
17,
the
U.S.
Financial
Stability
Oversight
Council
recommended
that

state
and
federal
regulators
review

regulations
and
the
tools
that
could
be
applied
to
digital
assets.
On
Jan.
5,
BTC
price
corrected
again
after
the

Federal
Reserve’s
December
Federal
Open
Market
Committee (FOMC)
 session,
which
confirmed
plans
to
ease
debt
buyback
and
likely
increase
interest
rates.

Regarding
derivatives
markets,
if
Bitcoin
price
trades
below
$42,000
by
the
Jan.
14
expiry,
bears
will
have
a
$75
million
net
profit
on
their
BTC
options.


Bitcoin
options
aggregate
open
interest
for
Jan.
14.
Source:
Coinglass

At
first
sight,
the
$455
million
call
(buy)
options
are
overshadowing
the
$295
million
puts,
but
the
1.56
call-to-put
ratio
is
deceptive
because
the
14%
price
drop
over
the
last
three
weeks
will
likely
wipe
out
most
of
the
bullish
bets.

If
Bitcoin’s
price
remains
below
$44,000
at
8:00
am
UTC
on
Jan.
14,
only
$44
million
worth
of
those
call
(buy)
options
will
be
available
at
the
expiry.
There
is
no
value
in
the
right
to
buy
Bitcoin
at
$44,000
if
BTC
is
trading
below
that
price.

Bears
might
bag
a
$75
million
profit
if
BTC
is
below
$42,000

Here
are
the
four
most
likely
scenarios
for
the
$750
million
options
expiry
on
Jan.
14.
The
imbalance
favoring
each
side
represents
the
theoretical
profit.
In
practice,
depending
on
the
expiry
price,
the
quantity
of
call
(buy)
and
put
(sell)
contracts
becoming
active
varies:


  • Between
    $40,000
    and
    $43,000:

    480
    calls
    vs.
    2,220
    puts.
    The
    net
    result
    is
    $75
    million
    favoring
    the
    put
    (bear)
    options.

  • Between
    $43,000
    and
    $44,000:

    1,390
    calls
    vs.
    1,130
    puts.
    The
    net
    result
    is
    balanced
    between
    call
    and
    put
    options.

  • Between
    $44,000
    and
    $46,000:

    1,760
    calls
    vs.
    660
    puts.
    The
    net
    result
    is
    $50
    million
    favoring
    the
    call
    (bull)
    options.

  • Between
    $46,000
    and
    $47,000:

    1,220
    calls
    vs.
    520
    puts.
    The
    net
    result
    is
    $125
    million
    favoring
    the
    call
    (bull)
    options.

This
crude
estimate
considers
put
options
being
used
in
neutral-to-bearish
bets
and
call
options
exclusively
in
bullish
trades.
However,
this
oversimplification
disregards
more
complex
investment
strategies.

For
instance,
a
trader
could
have
sold
a
put
option,
effectively
gaining
a
positive
exposure
to
Bitcoin above
a
specific
price.
But,
unfortunately,
there’s
no
easy
way
to
estimate
this
effect.


Related:




Traders
say
Bitcoin
run
to
$44K
may
be
a
relief
bounce,
citing
a
repeat
of
December’s
‘nuke’

Bulls
need
$46,000
for
a
decent
win

The
only
way
bulls
can
score
a
significant
gain
on
the
Jan.
14
expiry
is
by
sustaining
Bitcoin’s
price
above
$46,000.
However,
if
the
current
short-term
negative
sentiment
prevails,
bears
could
easily
pressure
the
price
down
4%
from
the
current
$43,800
and
raise
the
profit
by
up
to
$75
million
if
Bitcoin
price
stays
below
$42,000.

Currently,
options
markets
seem
balanced,
giving
bulls
and
bears
equal
odds
for
Friday’s
expiry.


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
move
involves
risk.
You
should
conduct
your
own
research
when
making
a
decision.

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