Data on Bitcoin derivatives suggest that Bears will fix BTC below $ 21K, leading to Friday's options expiring

Data on Bitcoin derivatives suggest that Bears will fix BTC below $ 21K, leading to Friday’s options expiring – Mail Bonus


Most Bitcoin (BTC) traders would rather see a sharp price correction and subsequent recovery than suffer for months under $ 24,000. However, BTC has been doing the opposite since June 14 and its latest struggle is that the property has not broken the $ 22,000 resistance. For this reason, most traders are holding back their bullish expectations until BTC announces a daily close above $ 24,000.

Events outside the cryptocurrency market are the main factor influencing investors’ perspectives on digital assets, and on July 14, US Treasury Secretary Janet Yellen warned that Inflation is “unacceptably high” and it strengthened support for the Central Bank’s efforts. When asked about the impact of rising interest rates on the economy, Yellen acknowledged the danger of a recession.

On the same day, JPMorgan Chase reported a 28% decline in profits compared to the previous year, despite stable income. The difference is mainly due to a $ 1.1 billion contribution to loan losses due to a “moderately deteriorating” economic outlook.

Bitcoin’s correlation with the S&P 500 is still incredibly strong and investors fear that a potential crisis in the global financial sector will inevitably lead to a re-examination of the $ 17,600 low from June 18.

S&P 500 and Bitcoin / USD 30 day correlation. Source: TradingView

The correlation measurement ranges from negative 1, which means that selected markets move in opposite directions, to positive 1, which reflects perfect and symmetrical movement. Inequality or lack of connection between the two assets would be denoted by 0.

The S&P 500 and Bitcoin 30-day correlation now stands at 0.87, which has been the norm for the past four months.

Most bullish bets are over $ 21,000

Bitcoin’s failure to break over $ 22,000 on July 8 came as a surprise to bulls because only 2% of options (buy) before July 15 have been put below $ 20,000. Thus, Bitcoin bears are slightly better off for the $ 250 million weekly expiration options.

Bitcoin options gather open interest rates before July 15th. Source: CoinGlass

A broader view using the 1.15 call-to-sell ratio shows more bets because open call (buy) rates stand at $ 134 million against $ 116 million sell (sell) options. Nevertheless, with Bitcoin now below $ 21,000, most bullish bets are likely to be worthless.

If the Bitcoin price stays below $ 21,000 at 8:00 UTC on July 15, only $ 25 million worth of these call (buy) options will be available. This difference occurs because there is no use in the right to buy Bitcoin at $ 21,000 if it trades below that level when it expires.

The bears could make $ 100 million in their own pockets

Below are three most likely situations based on current pricing action. The number of option contracts available on July 15 for the purchase (bull) and sale (bear) instruments varies, depending on the depreciation price. The imbalance, which is in both sides’ favor, is a theoretical gain:

  • Between $ 18,000 and $ 19,000: 10 calls against 5,200 parts. The net profit of the bears is about 100 million dollars.
  • Between $ 19,000 and $ 20,000: 200 calls against 3,400 sets. A net result gives the bears a 60 million dollar advantage.
  • Between $ 20,000 and $ 21,000: 1,300 calls against 1,700 sets. The net result is a balance between bulls and bears.

This rough estimate takes into account the call options used in bullish betting and the put options only in neutral to bearish trading. Nevertheless, this oversimplification avoids more complex investment methods.

Connected: Bitcoin hits the main development line near $ 20K as the US dollar reaches a new 20-year high

Future markets show that bears are better off

Bitcoin bears need to push the price below $ 19,000 on July 15 to secure a $ 100 million profit. On the other hand, the best-case scenario of the bulls requires pushing over $ 20,000 to balance the scales.

Lack of appetite from professional traders in the Bitcoin CME future suggests that bulls are less likely to push prices higher in the short term.

That being said, the most likely scenario is a bear favor, and to secure this Bitcoin price, you only need to trade below $ 21,000 when the options expire on July 15th.

The views and opinions expressed herein are solely theirs author and do not necessarily reflect the views of Cointelegraph. Every investment and business involves risk. You should do your own research when making a decision.