Bitcoin derivative data indicates that bears will fix BTC below 21,000 dollars leading to Friday’s option expiration
Most Bitcoin (BTC) traders would rather see a sharp price correction and a subsequent recovery than bother for several months below $ 24,000. However, BTC has done the opposite since June 14, and the latest battle is that the asset fails to break above the resistance of $ 22,000. For this reason, most traders hold back their bullish expectations until BTC puts in a daily close above $ 24,000.
Events outside the crypto market are the primary factor influencing investors’ perspectives on digital assets, and on July 14, US Treasury Secretary Janet Yellen warned that Inflation is “unacceptably high”, and she reinforced support for the Federal Reserve’s efforts. Asked about the impact of rising interest rates on the economy, Yellen acknowledged the risk of a recession.
On the same day, JPMorgan Chase reported a 28% decline in profits compared to the previous year despite stable revenues. The difference is mainly due to a provision of $ 1.1 billion for credit losses due to a “modest deterioration” in the economic outlook.
Bitcoin’s correlation with the S&P 500 remains incredibly high, and investors fear that a potential crisis in the global financial sector will inevitably lead to a new test of the lowest $ 17,600 from 18 June.
The correlation calculation varies from a negative 1, which means that selected markets move in opposite directions, to a positive 1, which reflects a perfect and symmetrical movement. A difference or lack of ratio between the two assets will be represented by 0.
The S&P 500 and Bitcoin 30-day correlation currently stands at 0.87, which has been the norm for the past four months.
Most bullish games are over $ 21,000
Bitcoin’s failure to break over $ 22,000 on July 8 surprised bulls because only 2% of the July 15 call options have been placed below $ 20,000. Thus, Bitcoin bears are slightly better positioned for the expiration of $ 250 million weekly options.
A broader view that uses the call-to-put ratio of 1.15 shows more bullish play because call (buy) open interest rates stand at $ 134 million against $ 116 million put options. Still, since Bitcoin is currently below $ 21,000, most bullish games are likely to be worthless.
If Bitcoin’s price stays below $ 21,000 at At 08:00 UTC on July 15, only $ 25 million of these call (purchase) options will be available. This difference occurs because there is no need for the right to buy Bitcoin at $ 21,000 if it is traded below that level at expiration.
Bears can have a profit of 100 million dollars
Below are the three most likely scenarios based on current price action. The number of option contracts available on 15 July for buy (bull) and put (bear) instruments varies, depending on the expiry price. The imbalance that favors each side constitutes the theoretical merit:
- Between $ 18,000 and $ 19,000: 10 calls vs. 5200 putter. The net result favors bears by 100 million dollars.
- Between $ 19,000 and $ 20,000: 200 calls vs. 3400 putter. The net result gives the bears an advantage of 60 million dollars.
- Between $ 20,000 and $ 21,000: 1,300 calls vs. 1,700 putter. The net result is balanced between oxen and bears.
This rough estimate considers the call options used in bullish games and the put options exclusively in neutral-to-bearish trades. Nevertheless, this oversimplification ignores more complex investment strategies.
Related: Bitcoin fights the key trend line close to $ 20,000 when the US dollar index reaches a new 20-year high
Futures markets show that bears are better positioned
Bitcoin bears must push the price below $ 19,000 on July 15 to secure a profit of $ 100 million. On the other hand, the bull’s best-case scenario requires a push over $ 20,000 to balance the weight.
The lack of appetite from professional traders in Bitcoin CME futures indicates that bulls are less likely to push the price higher in the short term.
That said, the most likely scenario favors bears, 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 here are solely those of author and does not necessarily reflect the views of the Cointelegraph. Every investment and trade involves risk. You should do your own research when making a decision.
