Bitcoin (BTC) briefly broke the $24,000 mark on July 20, but the hype lasted less than two hours after the resistance level proved more challenging than expected. On a positive note, the $24,280 high represents a 28.5% increase from the July 13 swing low of $18,900.
On July 19, Bank of America released its latest survey of fund managers under the headline “I’m so bearish, I’m bullishThe report speaks of investor pessimism, expectations of weak corporate earnings and the lowest level since September 2008 in stock placements.
The 4.6% rise in the Nasdaq Composite Technology Index between July 18-20 also gave the bulls much-needed hope to profit from the impending weekly options expiration on July 22.
Global macroeconomic tensions eased on July 20 after Russian President Vladimir Putin confirmed plans to restore flow of the Nord Stream gas pipeline after an ongoing maintenance period. However, data over the past few months show that Germany has reduced its dependence on Russian gas from from 55% to 35% your demand.
The bears placed their bets at or below $21,000.
Open interest for options expiring July 22 is $540 million, but the actual figure will be lower as the bears were caught off guard. These traders weren’t expecting a 23% rise from July 13-20 because their bids were targeting $22,000 and below.
A call-to-put ratio of 1.09 shows a balance between $280 million call (buy) options and $260 million put (sell) options. Bitcoin is currently worth about $23,500, which means that most bearish rates are likely to depreciate.
If the price of Bitcoin stays above $22,000 at 8:00 AM UTC on July 22, these put options (sells) will only be available in the amount of $30 million. This difference arises because the right to sell Bitcoin at $22,000 is worthless if BTC trades above that level at expiration.
The Bears are aiming for $24,000 to make a $235 million profit.
Below are the four most likely scenarios based on the current price movement. The number of option contracts available on July 22 for call (bullish) and put (bearish) instruments varies depending on the expiration price. The imbalance in favor of each side is the theoretical profit:
- $20,000 to $21,000: 900 calls versus 3000 puts. Net result in favor of $60 million puts (bearish).
- $21,000 to $22,000: 2400 calls versus 3000 puts. The net result is balanced between bulls and bears.
- $22,000 to $24,000: 6600 calls versus 500 puts. Net result in favor of $140 million calls (bullish).
- $24,000 to $26,000: 9400 calls versus 0 puts. The Bulls take full control, earning $235 million.
This rough estimate takes into account puts used in bearish bets and calls only in neutral or bullish trades. However, this oversimplification ignores more complex investment strategies.
For example, a trader could sell a put option, effectively gaining positive access to bitcoin above a certain price, but unfortunately there is no easy way to measure this effect.
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The bears have until Friday to fix things.
Bitcoin Bears need to push the price below $22,000 on July 22 to avoid a $140 million loss. On the other hand, at best it takes a small push above $24,000 for the bulls to maximize their profits.
The Bitcoin Bears just had $222 million leveraged long positions liquidated from July 17 to July 20, so they should have less margin needed to push the price higher. In other words, the bulls have a head start to keep BTC above $22,000 before the options expire on July 22.
The views and opinions expressed here are solely those of author and do not necessarily represent the views of Cryptooshala. Every investment and trading move involves risk. You should do your own research when making a decision.
Credit : cointelegraph.com