Friday’s shocking $3.2B Bitcoin option expiration may initiate a new rally

Bitcoin (Bitcoin) It has been trading in a descending channel pattern since it hit an all-time high of $67,000 on October 20, just a day later ProShares’ Bitcoin Strategy ETF (BITO) is listed on Nasdaq.

However, when the $3.2 billion monthly option expires on October 29, the bulls have enough incentives to fix the price of Bitcoin above $60,000.

Coinbase’s Bitcoin price (in U.S. dollars). Source: TradingView

At present, although the assets under management of the ETF reached US$1 billion within 48 hours, investors are showing mixed sentiment towards the approval of the exchange-traded fund. Either the market’s expectations for these funds are ridiculously high, or they were included in the pricing of the event before the 42% rise in October before October 19.

The uncertainty of US regulation is also a decisive factor preventing some large institutional investors from entering the industry.At the hearing of the U.S. Senate Committee on October 26, Rostin Behnam, Acting Chairman of the Commodity Futures Trading Commission (CFTC), will Law enforcement by government agencies Digital asset space to the police on duty.

Benham added:

“Currently occurring market transactions are an important part of the risks posed by digital assets.”

The bulls are expected to make a profit of $715 million

Usually, these comments have little effect on bullish markets, which raises the question of whether the 13% correction since the all-time high on October 20 marks the end of a positive cycle.

The monthly expiration date on October 29 will be a strength test for the shorts, because any price higher than $58,000 means that the longs have a profit of $385 million or more.

Bitcoin Options aggregates open positions on October 29. Source: Bybt

At first glance, compared with the $1.24 billion put (sell) option, the $1.94 billion bull (buy) instrument dominates 56% of the monthly expiration date.

However, the put option ratio of 1.56 is deceptive because puts are surprised that if the price of Bitcoin stays above $58,000 at 8:00 AM UTC on October 29, most of their put options will be cleared.

If the BTC price is higher than this level, you have a put option, that is, the right to sell Bitcoin at a price of $55,000, and it will become worthless.

Bulls feel comfortable above $58,000

68% of put options (representing the right to sell bitcoin at a pre-set price) are priced at $58,000 or less.

The following are the four most likely scenarios considering the current price level. In addition, the data shows how many contracts for long (bullish) and short (bearish) instruments will be available on October 20.

  • Between USD 52,000 and USD 55,000: 6,500 call options and 6,530 put options. The end result is a balance between bulls and bears.
  • Between USD 55,000 and USD 58,000: 9,510 call options and 4,610 put options. The net result is in favor of long positions of USD 270 million.
  • Between USD 58,000 and USD 60,000: 9,900 call options and 3,490 put options. The net result continues to benefit the longs of USD 385 million.
  • More than 60,000 USD: 13,870 call options and 1,970 put options. The end result will benefit the bulls by US$715 million.

As shown above, the imbalance in favor of either party represents the potential theoretical profit at maturity.

This rough estimate takes into account the call (buy) options used in the call strategy and the put (sell) options specifically used for neutral to put trading. However, traders could have sold put options, effectively gaining active exposure to bitcoins above a certain price. Unfortunately, there is no easy way to estimate this impact.

Can a bearer fix Bitcoin below $55,000?

The shorts need to pull back 6% from the current price of $58,500 to avoid a loss of $270 million. Although not many at first glance, traders must also take into account the bullish momentum brought about by ETF approvals.

With less than 36 hours before the expiration on October 29, the bulls may ensure victory by keeping Bitcoin above $59,000. As for the shorts, the road to below $55,000 may seem far away, but it may be worth it.

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