Bitcoin bulls must recover $41K before Friday’s $615 million BTC options expire

Over the past three months, the daily closing price of Bitcoin (BTC) has fluctuated between $35,050 and $47,550, which is a range of 35.7%. While it may seem like an exaggeration, this is not uncommon, especially given BTC’s historic volatility of 68% year-on-year.

Bitcoin/USD 1 Day Chart on Coinbase. Source: TradingView

The relief that followed the April 11 dip below $40,000 followed the US Consumer Price Index (CPI) report which announced 8.5% for March, its highest since 1981. Meanwhile, the UK CPI jumped to 7%. , a 30-year high.

For these reasons, cryptocurrency traders are increasingly concerned about the ability of the US Federal Reserve’s expected rate hikes in 2022 to contain inflationary pressures. If the global economies fall into recession, investors are likely to move away from risky asset classes such as cryptocurrencies.

In addition, Bitcoin’s price correction was costly for traders to use as total liquidations reached $428 million on derivatives exchanges.

Bulls placed their bets on $50,000 and up

The outstanding interest for the options expiration on April 15 in Bitcoin is $615 million, but the actual figure will be much lower because bulls were overly optimistic. These traders may have been fooled by the short-lived pump to $48,000 on March 28, as their options expiration bets go beyond $50,000 on April 15.

Bitcoin’s recent drop below $41,000 surprised the bulls and only 18% of call (buy) options for April 15 have moved below that price level.

Bitcoin options aggregate open interest for April 15. Source: CoinGlass

The call-to-put ratio of 1.21 shows the dominance of the $335 million call-to-put rate over the $280 million put (sell) options. Nevertheless, as Bitcoin is near $41,000, most bullish bets are likely to become worthless.

If the price of Bitcoin stays below $42,000 on April 15 at 8:00 AM UTC, these call options are only $62 million available. This difference arises because a right to buy Bitcoin for $42,000 is worthless if BTC trades below that level upon expiration.

Taurus aim for $43,000 to balance the scales

Below are the four most likely scenarios based on the current price action. The number of option contracts available on April 15 for call (bull) and put (bear) instruments varies, depending on the expiration price. The imbalance favoring both sides makes up the theoretical gain:

  • Between $39,000 and $41,000: 950 calls versus 5,400 puts. Net income favors the put (bear) instruments by $180 million.
  • Between $41,000 and $42,000: 1,500 calls versus 3,950 puts. The net result is in favor of the bears by $100 million.
  • Between $42,000 and $43,000: 1850 calls versus 3300 puts. Net income favors the put (bear) instruments by $60 million.
  • Between $43,000 and $45,000: 2,700 calls versus 2,800 puts. The net result is balanced between call (buy) and put (sell) options.

This rough estimate takes into account the put options used in bearish bets and the call options only in neutral to bullish trades. Yet this oversimplification does not take into account more complex investment strategies.

For example, a trader could have sold a put option and gained positive exposure to Bitcoin above a certain price, but unfortunately there is no easy way to estimate this effect.

Related: Mark Yusko Explains The Real Problem With Fed Policy – ​​And Why Bitcoin Matters

Bears will try to withdraw BTC below $41,000

Bitcoin bears must push the price below $41,000 on April 15 to secure a profit of $180 million. On the other hand, the bulls’ best-case scenario requires a push above $43,000 to neutralize any impact.

Bitcoin bulls had leverage of $180 million on April 10 and 11, so they should have less margin than is needed to increase the price. That said, bears will no doubt try to squeeze BTC below $41,000 ahead of the options expiration on April 15.

The views and opinions expressed here are solely those of the writer and do not necessarily reflect the views of e-RUPI Guide. Every investment and trading move involves risks. You should do your own research when making a decision.