New Bitcoin price highs make bulls profit on Friday’s 1.2B USD BTC option expiration

Every time a new bitcoin (Bitcoin) A new historical high is formed, and high expectations follow. This time it was no different, as its price briefly touched $69,000 in the early morning of November 9.

Words are just words, so excessive bullishness or bearishness will not cause losses, but in the options market, betting comes at a price. For example, on November 10, the transaction price of the right to buy Bitcoin (call option) for $100,000 on December 31 was BTC 0.022, which is $1,460. For this privilege, investors pay upfront fees, also known as premiums.

After Bitcoin hit the highest monthly closing price in history, analysts and experts quickly announced their goal of $100,000. However, history has proven that short-term price estimates rarely work, and it doesn’t matter whether you are an anonymous Twitter figure or a multimillion-dollar cryptocurrency fund manager.

Bitcoin price estimates are often far apart

Despite being a widely successful venture capitalist, Tim Draper’s $250,000 price guess In 2020, it has dropped by 88%.Even well-known bank analysts can make big mistakes, just like Citibank FX Wire’s November 2020 “Market Commentary”, they cited Potential high of $318,000 In 2021. Nevertheless, there are still 50 days before the end of the year, and maybe some of these predictions will come true, but most of them are still no better than random numbers.

Bears may be focusing on regulatory obstacles, for example, Singapore Become the latest area to ban crypto derivatives trading services. Huobi Global announced on Tuesday that it will close the accounts of all Singaporean users by the end of March 2022. September, ThailandThe SFC also recommended that Huobi’s local operating license be revoked.

A preliminary analysis of open positions based on call (buy) options and put (sell) instruments shows that the $1.3 billion option expiration on November 12 is balanced.

Bitcoin Options aggregates open positions on November 12. Source: Bybt

At first glance, compared to put (sell) instruments worth $565 million, call (buy) options worth $630 million account for only 12% of weekly expirations.

However, the put ratio of 1.12 is deceptive, as the recent rally may eliminate most of the put bets. For example, if the price of Bitcoin stays above $66,000 at 8:00 AM UTC on November 12, almost all bearish (sell) instruments become worthless. If the transaction price of Bitcoin is higher than that price, the right to sell Bitcoin at a price of $58,000 or $62,000 has no value.

The bull’s goal may be to make a profit of US$410 million above US$70,000

Here are the four most likely scenarios for expiration on November 12. The imbalance in favor of either party represents theoretical profit. In other words, depending on the expiration price, the number of active (buy) and put (sell) contracts is different:

  • Between USD 64,000 and USD 66,000: 2,440 call options and 310 put options. The end result is $135 million in favor of bullish (bull market) instruments.
  • Between USD 66,000 and USD 68,000: 3,430 call options and 50 put options. The net result is $225 million in favor of bullish (bull market) instruments.
  • Between USD 68,000 and USD 70,000: 44,070 call options and 10 put options. The end result is $305 million in favor of bullish (bull market) instruments.
  • More than 70,000 USD: 5,820 call options and 0 put options. The end result is a complete dominance, with the bulls making a profit of US$410 million.

This rough estimate assumes that call options are only used for call bets, while put options are used for neutral to put trading. This over-simplification ignores more complex investment strategies.

For example, traders could have sold put options, effectively gaining positive exposure to bitcoin above a certain price. Unfortunately, there is no easy way to estimate this impact.

The best hope of bears proved to be ineffective

After rising 19% in 30 days, the bulls dominated the weekly due date on November 12.One factor that may be partly responsible for this move is that the The $1 trillion U.S. Infrastructure Act Pass the U.S. House of Representatives. The bill requires all digital asset transactions worth more than $10,000 to be reported to the IRS.

Traders must consider that during a bull market, even bearish news has little effect on prices. Moreover, the price required for the effort is rising prices, which are usually ineffective.

The bulls may use the current situation to push BTC above $70,000, which will result in an additional estimated profit of $105 million, thereby pushing its total to $410 million.

The views and opinions expressed here only represent author It does not necessarily reflect the views of Cointelegraph. Every investment and transaction involves risks. When making a decision, you should conduct your own research.