Bitcoin (BTC) has been trying to break above the $20,500 resistance for 35 days, and the last attempt on October 6 failed. Meanwhile, the bears showed strength four different times after BTC tested levels below $18,500 during this time period.
Investors are still unsure if $18,200 was really the bottom as the support level weakens each time it is tested. That’s why it’s important for bulls to maintain momentum as the $510 million in options expire this week.
The October 21 options expiration is especially important because bitcoin bears can get $80 million by removing BTC below $19,000.
The bears placed their bets at $19,000 and below
Open interest for the October 21 options expiration is $510 million, but the actual figure will be lower because the bears were too supportive. These traders completely missed the mark by placing bearish bets at $17,500 and below after BTC fell below $19,000 on October 13.
The call-to-put ratio of 0.77 indicates the dominance of open interest on the $290 million put options over the $220 million call options. However, because bitcoin is located near $ 19,000, it is likely that most of the bearish bets will become worthless.
If the price of bitcoin remains above $19,000 at 08:00 UTC on October 21, only 4% of these put options will be available. The reason for this difference is that the right to sell bitcoin at $18,000 or $19,000 is worthless if bitcoin is trading above that level.
The Bulls can still turn it around and get a $150 million profit
Below are the four most likely scenarios based on the current price action. The number of bitcoin options contracts available on October 21 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: 0 calls per 4,300 puts. The net result in favor of the put (carry) instruments is under 80 million dollars.
Between $19,000 and $20,000: 1,500 call options versus 1,100 put options. The net result is balanced between calls and puts.
Between $20,000 and $21,000: 4,300 call options per 100 put options. The net result is in favor of the buying (bullish) instruments by $85 million.
Between $21,000 and $22,000: 7,200 call options versus 0 put options. The net result is in favor of the buying instruments (bullish) by $150 million.
This rough estimate considers put options used in bearish bets and call options exclusively in neutral to bullish trades. Despite this, it is a great simplification that does not take into account more complex investment strategies.
For example, a trader could sell a put option, which could gain positive exposure to bitcoin above a specific price; but unfortunately there is no easy way to estimate this effect.
Also read: Big move in bitcoin price expected as volatility remains at historic lows and ‘exhausted’ sellers
Another decrease of $19,000 is not surprising
Bitcoin Bears need to push the price below $19,000 to reach an $80 million profit. In contrast, in the best-case scenario, the bulls need to break above $21,000 to turn the situation around and achieve a $150 million gain.
The bulls liquidated $80 million in leveraged long positions on October 12-13, so they should have less room than necessary to drive the price higher. Therefore, the bears are more likely to find BTC stuck below $19,000 before the October 21st weekly options expire.
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