Bitcoin bulls risk losing $ 365 million after the BTC options expire on Friday


Bitcoin’s (BTC) price action was not bullish despite the all-time high of $ 69,000 on November 10th. Some argue that the descending channel formed 40 days ago is the predominant trend and $ 56,000 marks its current resistance.

BTC / USD price on FTX. Source: TradingView

One such bear market follows US regulatory scrutiny after a November 1 report by the President’s Working Group on Financial Markets suggested that US stablecoin issuers should be subject to “fair federal supervision,” much like banks and credit unions.

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On November 12, the Bitcoin-Backed Exchange Traded Fund (ETF) application was rejected by the US Securities and Exchange Commission. To justify the rejection, the regulator cited the inability of its participants to prevent fraud and market manipulation in Bitcoin trading.

More recently, on November 23, the chairman of the U.S. Senate Committee on Banking, Housing, and Urban Development posted notices to multiple exchanges and stablecoin issuers. The questions about consumer and investor protection in stablecoins suggest that lawmakers may be preparing a hearing on this issue.

Still, bulls might see such news differently, as stablecoins are by no means necessary for Bitcoin to work. In addition, there is not much the US government can do to suppress projects and developers willing to relocate outside of their jurisdiction.

Bitcoin options mostly bullish for the Friday expiration date

Despite the 17% retreat in the past 14 days from the all-time high of $ 69,000, Bitcoin call (buy) options dominate Friday’s expiration by far.

Bitcoin options aggregate open interest for November 26th. Source: Bybt

At first glance, the 1.9bn call (buy) options dominate, but the 2.13 call-to-put ratio is deceptive as the recent decline is likely to wipe out 90% of bullish bets .

For example, if the price of Bitcoin stays below $ 58,000 at 8:00 a.m. UTC on November 26th, these call (buy) options will only be available to the value of $ 150 million. The right to buy Bitcoin for $ 60,000 or $ 70,000 has no value if it trades below that price.

Bears can secure a profit of $ 365 million under $ 56,000

Below are the four most likely scenarios based on the current price action. For example, the data shows how many contracts will be available on Friday for both bull (call) and bear (put) instruments. The imbalance favored by each side represents the theoretical gain:

  • Under $ 56,000: 720 calls vs. 7,490 puts. Net income favors bear (put) options by $ 365 million.
  • Between $ 56,000 and $ 58,000: 2,630 calls vs. 4,840 puts. The net result is $ 125 million in favor of the bear (put) instruments.
  • Between $ 58,000 and $ 60,000: 3,600 calls vs. 3,850 puts. The net result is balanced.
  • Between $ 60,000 and $ 62,000: 6,180 calls vs. 2,340 puts. Net income shifts in favor of call (bull) instruments by $ 230 million.

This rough estimate takes into account the call options used in bullish bets and put options only in neutral to bearish trades. However, a trader could have sold a call option, which would effectively have given them negative exposure to Bitcoin above a certain price. Unfortunately, there is no easy way to gauge this effect.

Cops have twice the incentive to defend $ 56,000

As the 40-day descending channel shows, the bulls will have to hold the $ 56,000 resistance to keep going. Keep in mind that it took less than two weeks to get Bitcoin from $ 41,500 to $ 56,000 on October 10th. Hence, maintaining this level is critical to confirming the all-time high of November 10th.

If the cops manage to push the price of Bitcoin above $ 58,000, it will save them from a potential loss of $ 365 million if the BTC bears gain the upper hand due to regulatory winds. A drop of just 1.5% from the current $ 56,800 could give the bears just enough confidence to cause even more pain.

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