Bitcoin derivatives data suggests bears at BTC pin below $21,000 on Friday options expiration

Bitcoin derivatives data suggests bears at BTC pin below $21,000 on Friday options expiration

Most bitcoin (BTC) traders would rather see a sharp price correction and subsequent recovery than languish for several months below $24,000. However, BTC has been doing the opposite since June 14 and its latest struggle is the asset’s inability to clear the $22,000 resistance. For this reason, most traders are holding back their bullish expectations until BTC posts a daily close above $24,000.

Events outside the cryptocurrency market are the main factor influencing investors’ perception of digital assets. On July 14, Janet Yellen, the Secretary of the US Treasury, warned that inflation is “unacceptably high” and reinforced support for the efforts of the Federal Reserve. When asked about the impact of rising interest rates on the economy, Yellen acknowledged the risk of a recession.

On the same day, JPMorgan Chase reported a 28% drop in profits from a year earlier, despite flat revenue. The difference comes primarily from a provision for credit losses of $1.1 billion due to a “slight deterioration” in its economic outlook.

Bitcoin’s correlation with the S&P 500 remains extremely high and investors fear a retracement of $17,600 on June 18 as a result of a potential crisis in the global financial sector.

30-day correlation between the S&P 500 and the Bitcoin/USD pair. Source: Trade View

The correlation metric goes from a negative 1, meaning the selected markets are moving in opposite directions, to a positive 1, indicating perfect, symmetrical movement. A difference or lack of relationship between the two assets would be represented by 0.

The 30-day correlation between the S&P 500 and bitcoin is currently at 0.87, which has been the norm for the past four months.

Most bullish bets are above $21,000

Bitcoin’s inability to break above $22,000 on July 8 surprised bulls, as only 2% of call options (call) for July 15 under $20,000. Therefore, bitcoin bears are slightly better positioned for the weekly $250 million options expiration.

Global bitcoin options open interest for July 15. Source: CoinGlass

A broader view using the call/put ratio of 1.15 indicates more bullish bets, such as the open interest of call options (call) equal to $134 million versus $116 million for put options (whore). However, with bitcoin currently below $21,000, most bullish bets are likely to become worthless.

If the price of Bitcoin remains below $21,000 at 8:00 UTC on July 15, only $25 million of these call options (call) available. The reason for this difference is that the right to buy bitcoin at $21,000 is pointless if it is trading below that level at expiration.

The IS bears could pocket a profit of 100 million dollars

Below are the three most likely scenarios based on the current price action. The number of option contracts available on July 15 for call (bullish) and put (bearish) instruments varies depending on the expiration price. The imbalance in favor of each side equals the theoretical profit:

  • Between $18,000 and $19,000 :10 calls per 5,200 putts. The net result favors the bears by $100 million.
  • Between $19,000 and $20,000 : 200 call options against 3,400 put options. The net result gives the Bears a $60 million advantage.
  • Between $20,000 and $21,000 : 1,300 call options versus 1,700 put options. The bottom line is balanced between bulls and bears.

This rough estimate considers the call options used in bullish bets and put options in neutral exclusively with bearish trades. Despite this, this oversimplification does not take into account more complex investment strategies.

Also read: Bitcoin Fights Major Trend Near $20,000 As US Dollar Index Hits New 20-Year High

Futures markets indicate that bears are in a better position

Bitcoin bears need to push the price below $19,000 on July 15 to reach a $100 million profit. On the other hand, the best-case scenario for the bulls requires a push above $20,000 to balance the scales.

Professional traders’ lack of appetite for CME bitcoin futures indicates that bulls are less inclined to push the price higher in the short term.

That said, the most likely scenario is in favor of the bears, and to ensure that, all that is needed is for the bitcoin price to trade below $21,000 when the options expire on July 15.

The views and opinions expressed here are solely those of theauthor and those do not necessarily represent Cointelegraph. All investment and business transactions involve risk. You should do your own research before making a decision.

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