115 Interactions, 8 Today
On September 3, $655 million in Bitcoin options expire, and data implies bulls may be driven to break the $50,000 resistance level before the expiry.
BTC failed to overcome the important psychological barrier of $50,000 on August 23 and has since retested the $47,000 support. If past data is any guide, the month of September had a poor performance in four of the prior five years.
Market expert Michael van de Poppe recently stated that Ether’s (ETH) break above $3,500 might be a leading indicator for Bitcoin’s next bull run, and now that Ether is trading at $3,700, traders are waiting for BTC’s next move with bated breath.
Bulls may be anticipating El Salvador’s ‘Bitcoin Law,’ which is set to go into force on September 7. Furthermore, the recent creation of a $150 million Bitcoin Trust fund by the country’s Legislative Assembly is another potentially optimistic development.
The funds will be used to help fund the construction of government-backed crypto ATMs as well as to provide incentives to boost the usage of Chivo, the government-backed digital wallet.
This week, Coinbase experienced a huge Bitcoin outflow following a pretty stable time. The transaction reduced the exchange’s balance to less than 700,000 BTC, a level last seen in December 2017.
The Sept. 3 expiry will be a test of strength for bulls because 93% of the $390 million call (buy) options have been placed at $48,000 or higher.
Moreover, these neutral-to-bullish instruments dominate the weekly expiry by 48% compared to the $265 million protective put options.
However, the 1.48 call-to-put ratio is deceiving because the excessive optimism seen from bulls could wipe out most of their bets if Bitcoin price remains below $48,000 at 8:00 am UTC on Friday. After all, what good is a right to acquire Bitcoin at $52,000 if it’s trading below that price?
Bears were also caught by surprise
78% of the put options, where the buyer holds a right to sell Bitcoin at a preestablished price, have been placed at $46,000 or lower. These neutral-to-bearish instruments will become worthless if Bitcoin trades above that price on Friday morning.
Below are the four most likely scenarios that consider the current price levels. The imbalance favoring either side represents the potential profit from the expiry.
- Between $45,000 and $46,000: 140 calls vs. 1,220 puts. The net result is $48 million favoring the protective put (bear) instruments.
- Between $46,000 and $48,000: 590 calls vs. 735 puts. The net result is balanced between bears and bulls.
- Between $48,000 and $50,000: 1,930 calls vs. 120 puts. The net result is $88 million favoring the call (bull) options.
- Above $50,000: 3,310 calls vs. 0 puts. The net result is a complete dominance with $165-million worth of bullish instruments.
The data shown above shows how many contracts will be available on Friday based on the expiry price.
This rough estimate takes into account calls (buy) options utilised in bullish strategies, whilst puts (sell) options are only employed in neutral-to-bearish transactions. Unfortunately, real life is not that straightforward because more complex investment strategies may be employed.
A trader, for example, could have sold a put option, effectively earning positive exposure to Bitcoin above a certain price. However, because there is no straightforward way to test this effect, the simple analysis above is the best assumption.
Incentives are in place for bulls to try to break $50,000
These two opposing forces will demonstrate their strength, and the ears will attempt to mitigate the harm. On the other hand, if the price of Bitcoin maintains over $48,000, the bulls will have some control over the situation.
The $50,000 level will be the most important test since bulls have strong incentives to smash every single protective put option and gain a $165 million edge.
The bear’s sole hope is for some unexpected regulatory newsflow or a poor outcome for Bitcoin price from the September 2 U.S. jobless claims report.
Even if there is still opportunity for more volatility until the expiry, the bulls appear to be in a better position.