Bitcoin (BTC) has been making higher lows for the past eight weeks, but during this time, the cryptocurrency has failed to convert $24,000 into support on at least three separate occasions. Precisely because of this, the expiration of $475 million worth of Bitcoin options on August 12 could be a game changer for the bulls.
Given current regulatory pressures, there seems to be ample reason to avoid bullish bets, especially after the US Securities and Exchange Commission filed charges on July 21 against a former Coinbase executive for insider trading to trade securities.
The additional impact of the implosion of the Terra-Luna ecosystem and the subsequent bankruptcy filing of cryptocurrency venture capital firm Three Arrows Capital (3AC) continue to weigh on markets. The latest victim is crypto lending platform Hodlnaut, which suspended user withdrawals on August 8.
For this reason, most traders are holding back on their bets above $24,000, but events outside of the cryptocurrency market could also have negatively impacted investor expectations. For example, according to regulatory filings released on August 9, Elon Musk sold $6.9 billion worth of Tesla stock.
Additionally, on Aug. 8, Ark Investment Manager CEO Cathie Wood explained that the 1.41 million Coinbase (COIN) shares that were sold in July were due to regulatory uncertainty and its possible impact on the business model. of the exchange.
Most of the bearish bets are below $23,000
The fact that Bitcoin did not drop below $21,000 on July 27 surprised bears because only 8% of puts for August 12 have been placed above $23,000. Therefore, Bitcoin bulls are better positioned for the expiry of the weekly options valued at $475 million.
A broader view using the 1.23 ratio between calls and puts shows more bullish bets because open interest on calls is $262 million vs. $212 million on puts. However, as Bitcoin is currently above $23,000, most bearish bets will likely be worthless.
If the price of Bitcoin sustains above $23,000 at 8:00 a.m. UTC on August 12, only $16 million of these put options will be at stake. This difference occurs because there is no value in the right to sell Bitcoin at $23,000 if the cryptocurrency trades above that level at expiration.
Bulls could pocket a $150 million profit
Below are the four most likely scenarios based on current price action. The number of option contracts available on August 12 for call (bullish) and put (bearish) instruments varies depending on the expiry price. The imbalance favoring each side constitutes the theoretical gain of each side:
- Between $21,000 and $22,000: 70 call options vs. 4,200 put options. The net result favors the bears by $90 million.
- Between $22,000 and $24,000: 1,600 call options vs. 1,460 put options. The net result is balanced between bulls and bears.
- Between $24,000 and $25,000: 3,700 call options vs. 120 put options. The net result favors the bulls by $90 million.
- Between $25,000 and $26,000: 5,900 call options vs. 30 put options. The profits of the bulls amount to $150 million.
This gross estimate considers that call options are used in bullish positions and put options exclusively in neutral or bearish operations. Even so, this oversimplification does not take into account more complex investment strategies.
Futures markets show bulls less likely to show strength
Bitcoin bears need to push the price below $24,000 on Aug. 12 to balance the scales and avoid a possible $150 million loss. However, Bitcoin bulls saw $265 million in long leveraged futures positions liquidated between Aug. 8-9, so they are less inclined to push the price higher in the short term.
With that being said, the most likely scenario for Aug 12 is the $22,000 to $24,000 range, providing a balanced outcome between the bulls and bears. Considering Bitcoin’s 50% negative return so far this year, even a small $90 million gain for the bulls could be considered a win, but that would require keeping the BTC price above $24,000.
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