$1.48B in Bitcoin options expire on Friday — Will BTC hold $22K?


Bitcoin (BTC) worth confronted fierce resistance at $23,000 after an 11% rally on Jan. 20, however that was sufficient to trigger $335 million in liquidations for brief positions utilizing futures contracts. The 36% year-to-date acquire to $22,500 brought about bears to be ill-prepared for the $1.48 billion month-to-month choices expiry on Jan. 27.

Bitcoin investor sentiment improved after indicators pointing to decrease inflationary stress urged that the U.S. Federal Reserve may quickly transfer away from its rate of interest improve and quantitative tightening. Generally referred to as a pivot, the development change would profit threat belongings similar to cryptocurrencies.

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On Jan. 22, the China-based peer-to-peer trades of USD Coin (USDC) reached a 3.5% premium versus the USA greenback, indicating reasonable FOMO by retail traders. This degree is the very best in additional than six months, suggesting extreme cryptocurrency shopping for demand has pressured the indicator above truthful worth.

The all-time excessive on the seven-day Bitcoin hash price — an estimate of processing energy devoted to mining — additionally supported the bullish momentum. The indicator peaked at 276.9 exo-hash per second (EH/s) on Jan. 19, signaling a reversion of the latest weak spot brought on by miners facing financial difficulties.

Regardless of the bears’ greatest efforts, Bitcoin has been buying and selling above $20,000 since Jan. 14 — a motion that explains why the $1.48 billion Bitcoin month-to-month choices expiry will vastly profit bulls regardless of the latest failure to interrupt the $23,200 resistance.

Bulls had been too optimistic, however stay properly positioned

Bitcoin’s newest rally on Jan. 20 caught bears abruptly, as a mere 6% of the put (promote) choices for the month-to-month expiry have been positioned above $22,000. Thus, bulls are higher positioned though they set practically 40% of their name (purchase) choices at $23,000 or larger.

Bitcoin choices mixture open curiosity for Nov. 25. Supply: CoinGlass

A broader view utilizing the 1.15 call-to-put ratio exhibits extra bullish bets as a result of the decision (purchase) open curiosity stands at $790 million in opposition to the $680 million put (promote) choices. However, most bearish bets will probably grow to be nugatory as Bitcoin is up 36% in January.

If Bitcoin’s worth stays above $22,000 at 8:00 am UTC on Jan. 27, solely $38 million value of those put (promote) choices will probably be accessible. This distinction occurs as a result of there isn’t any use in the appropriate to promote Bitcoin at $21,000 or $22,000 if it trades larger on expiry.

Bears may safe a $595 million revenue

Beneath are the 4 almost certainly situations primarily based on the present worth motion. The variety of choices contracts accessible on Jan. 27 for name (bull) and put (bear) devices varies, relying on the expiry worth. The imbalance favoring all sides constitutes the theoretical revenue:

  • Between $20,000 and $21,000: 12,800 calls vs. 7,100 places. The web end result favors bulls by $115 million.
  • Between $21,000 and $22,000: 17,600 calls vs. 2,800 places. The web end result favors bulls by $320 million.
  • Between $22,000 and $23,000: 21,200 calls vs. 1,100 places. Bulls stay in management, profiting $455 million.
  • Between $23,000 and $24,000: 25,300 calls vs. 0 places. Bulls fully dominate the expiry, racking up $595 million.

This crude estimate considers the decision choices utilized in bullish bets and the put choices solely in neutral-to-bearish trades. Even so, this oversimplification disregards extra complicated funding methods.

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Bitcoin bears have to push the worth beneath $21,000 on Jan. 27 to tremendously scale back their losses. Nonetheless, Bitcoin bears lately had $335 million value of liquidated leveraged quick futures positions, so that they probably have much less margin required to exert energy within the quick time period.

Consequently, essentially the most possible situation for the January month-to-month BTC choices expiry is the $22,000 or larger degree, offering an honest win for bulls.