Every time a new all-time high for Bitcoin (BTC) is reached, excessive expectations ensue. This time it was no different, as its price briefly touched USD 69,000 in the early hours of November 9.
Bitcoin 8h, we got our November 9th historical correction, seems to be very minor for now. Naturally I expect at bigger correction after we hit the 84k region, and then into blast off.$ BTC #Crypto #Bitcoin pic.twitter.com/cfbBkOIFEK
– Miles J Creative (@JohalMiles) November 9, 2021
Bitcoin 8-hour chart, we have our historical correction from Nov 9, it appears to be very small for now. Naturally, I expect a bigger correction after we hit the $ 84,000 region, and then the price shoots up.
Words are just words, so there is no loss from being excessively bullish or bearish, but in the options markets there is a price for placing those bets. For example, as of November 10, a right to buy Bitcoin (call option) at USD 100,000 on December 31 is trading at 0.022 BTC, that is, USD 1,460. For this privilege, the investor pays an initial fee which is also known as a premium.
Analysts and experts are rushing to issue their targets of $ 100,000 after Bitcoin posted the highest monthly close in its history. Nevertheless, History has shown that short-term price estimates rarely work, and it doesn’t matter if you’re dealing with an anonymous Twitter figure or a seasoned crypto fund manager.
Bitcoin price estimates are often a long way off
Despite being a widely successful venture capitalist, Tim Draper’s 2020 prediction of a $ 250,000 price was 88% wrong. Even popular banking analysts can get a lot wrong, as did a November 2020 Citibank FX Wire “Market Commentary” citing a potential maximum of $ 318,000 in 2021. Still, with 50 days until the end of the year, some of those prophecies may come true, but most are still nothing more than random numbers.
Bears are possibly on the lookout for regulatory hurdles, for example, Singapore became the latest region to ban crypto derivatives trading services. Huobi Global announced on Tuesday that it would close the accounts of all Singapore-based users by the end of March 2022. In September, the Securities and Exchange Commission of Thailand also recommended revoking Huobi’s local operating license.
A first analysis based on the open interest of the call and put options presents a balanced situation for the expiration of USD 1.3 billion in options on November 12.
At a glance, $ 630 million in call options dominate weekly expiration by just 12%, compared to $ 565 million in put instruments.
However, the 1.12 call / put ratio is misleading, because the recent rally will likely erase most of the bearish bets. For example, if the price of Bitcoin sustains above $ 66,000 at 8:00 am UTC on November 12, virtually all selling instruments will lose their value. There is no value in a power to sell Bitcoin at $ 58,000 or $ 62,000 if it is trading above that price.
The bulls could aim for a $ 410 million profit above $ 70,000
Here are the four most likely scenarios for the November 12 expiration. The imbalance that favors one side or the other represents the theoretical gain. In short, according to the expiration price, the amount in sets of buy and sell contracts varies:
- Between $ 64,000 and $ 66,000: 2,440 call options vs. 310 put options. The net result is USD 135 million in favor of purchase instruments (bullish).
- Between $ 66,000 and $ 68,000: 3,430 call options vs. 50 put options. The net result is USD 225 million in favor of purchase instruments (bullish).
- Between $ 68,000 and $ 70,000: 44,070 call options versus 10 put options. The net result is USD 305 million in favor of purchase instruments (bullish).
- Above $ 70,000: 5,820 call options vs. no put option. The net result is total dominance, with the bulls raking in a profit of $ 410 million.
This gross estimate considers that call options are used exclusively in bullish bets, while put options in neutral or bearish operations. This oversimplification does not take into account more elaborate investment strategies.
For example, a trader could have sold a put option, effectively gaining positive exposure to Bitcoin above a specific price. Unfortunately, there is no easy way to estimate this effect.
The best hopes of the bears turned out to be ineffective
After a rise of 19% in 30 days, the bulls dominate the weekly expiration of November 12. One factor that may have been partially responsible for this movement was the absence of an adverse impact on prices after America’s billion dollar infrastructure bill passed the House of Representatives. The bill requires reporting to the IRS all digital asset transactions worth more than $ 10,000.
Traders should be aware that even bearish news has little to no impact on price during bull runs. Also, the effort required by bears to push the price is greater and is often ineffective.
The bulls could take advantage of the current situation to push BTC above $ 70,000, leading to an estimated additional gain of $ 105 million bringing their total to $ 410 million.
The views and opinions expressed here are solely those of the Author and do not necessarily reflect the views of Cointelegraph.com. Each investment and commercial movement involves risks, you must do your own research when making a decision.
Keep reading:
- Bitcoin price has to fall further before it can climb to $ 70,000, says one trader
- How Cautiously Bullish Bitcoin Traders Use Options to Maintain BTC Exposure
- Bitcoin finds itself in classic ‘bull pennant’ breakout as BTC whales buy massively
- Stader Labs completes $ 4 million fundraiser to develop its crypto staking platform
- Risk Averse Ethereum Traders Use This Options Strategy To Increase Their Exposure To ETH
- 3 Ways Traders Use Bitcoin Futures To Make Profits
- Nov 10 Price Analysis: BTC, ETH, BNB, ADA, SOL, XRP, DOT, DOGE, SHIB, LUNA