Bulls or bears? Both have a fair chance on Friday’s Bitcoin options expiration – UK Time News

Bitcoin (BTC) briefly broke above $24,000 on July 20, but the excitement lasted less than two hours after the resistance level proved more challenging than expected. On the upside, the $24,280 high represents a 28.5% gain from the July 13 swing low at $18,900.

According to Yahoo Finance, Bank of America released its latest survey of fund managers on July 19, and the headline was, “I’m so bearish, I’m bullish.” The report cited investor pessimism, expectations of weak corporate earnings and equity allocations at their lowest levels since September 2008.

The 4.6% gain on the tech-heavy Nasdaq Composite Index between July 18 and July 20 also provided much needed hope for bulls to take advantage of the upcoming weekly options expiration on July 22.

Global macroeconomic tensions eased on July 20 after Russian President Vladimir Putin confirmed plans to restore the Nord Stream gas pipeline after the current maintenance window. However, in recent months, data shows that Germany has reduced its dependence on Russian gas from 55% to 35% of its demand.

Bears placed their bets on $21,000 or below

The outstanding interest for options expiring on July 22 is $540 million, but the actual figure will be lower as bears are surprised. These traders were not expecting a 23% rally from July 13 to July 20 as their bets were targeting $22,000 and below.

The call-to-put ratio of 1.09 shows the balance between the $280 million call (buy) rate and the $260 million put (sell) options. Currently, Bitcoin is near $23,500 meaning most bearish bets are likely to become worthless.

If Bitcoin’s price remains above $22,000 on July 22 at 8:00 AM UTC, these put (sell) options will be available for only $30 million. This difference arises because the right to sell Bitcoin for $22,000 is useless if BTC trades above that level at expiration.

Bears aim for $24,000 to secure a $235 million profit

Below are the four most likely scenarios based on the current price action. The number of option contracts available on July 22 for call (bull) and put (bear) instruments varies depending on the expiration price. The imbalance that favors both parties constitutes the theoretical gain:

• Between $20,000 and $21,000: 900 calls versus 3,000 puts. Net income favors the put (bear) instruments by $60 million.
• Between $21,000 and $22,000: 2,400 calls versus 3,000 puts. The net result is balanced between bulls and bears.
• Between $22,000 and $24,000: 6,600 calls versus 500 puts. Net income favors call (bull) instruments by $140 million.
• Between $24,000 and $26,000: 9,400 calls versus 0 puts. Bulls take total control and profit $235 million.

This rough estimate takes into account the put options used in bearish betting and the call options used in neutral to bullish trades only. Yet this oversimplification does not take into account more complex investment strategies.

For example, a trader could have sold a put option and gained positive exposure to Bitcoin above a certain price, but unfortunately there is no easy way to estimate this effect.

Related: Bitcoin could hit $120K in 2023, trader says as BTC price rises 25% in a week

Bears have until Friday to turn the tide

Bitcoin bears must push the price below $22,000 on July 22 to avoid a $140 million loss. On the other hand, the bulls’ best-case scenario requires a slight push above $24,000 to maximize their profits.

Bitcoin bears had just liquidated $222 million leverage long positions from July 17 to July 20, so they should have less margin to increase the price. In other words, bulls have an edge to keep BTC above $22,000 ahead of the options expiration on July 22.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of UKTN. Every investment and trading move involves risks. You should do your own research when making a decision.