Bitcoin (BTC) briefly rose above $24,000 on July 20, but the excitement lasted less than two hours after the resistance level proved harder than expected. On the bright side, the high of $24,280 represents a 28.5% increase from the July 13 low of $18,900.
According to Yahoo Finance, on July 19, Bank of America released its latest survey of fund managers, which was titled “I’m so bearish, I’m bullish” (“I’m so bearish, I’m bullishThe report cited investor pessimism, weak corporate earnings expectations and equity allocations that are at their lowest level since September 2008.
The 4.6% advance in the high-tech Nasdaq Composite Index from July 18-20 also gave hope to bulls needed to take advantage of weekly options due to expire on July 22. .
Global macroeconomic tensions eased on July 20 after Russian President Vladimir Putin announced his intention to restore flow from the Nord Stream gas pipeline after the current maintenance period. However, in recent months, data shows that Germany has reduced its dependence on Russian gas from 55% to 35% of its demand.
The bears placed their bets at $21,000 or less
Open interest for the July 22 options expiration is $540 million, but the actual figure will be lower as the bears have taken it by surprise. These traders did not expect a 23% rally from July 13 to July 20, as their bets were targeting $22,000 and lower.
The call-to-put ratio of 1.09 shows the balance between the open interest of the $280 million call options and the $260 million put options. Currently, bitcoin sits near $23,500, which means that most of the bearish bets are likely to become worthless.
If the bitcoin price remains above $22,000 at 08:00 UTC on July 22, only $30 million of these options will become available. The reason for this difference is that the right to sell bitcoin at $22,000 is useless if bitcoin is trading above that level.
Bears target $24,000 to achieve a profit of $235 million
Below are the four most likely scenarios based on the current price action. The number of option contracts available on July 22 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 $20,000 and $21,000 : 900 calls against 3,000 puts. The net result in favor of the put (carry) instruments is under 60 million dollars.
- Between $21,000 and $22,000: 2,400 call options compared to 3,000 put options. The bottom line is balanced between bulls and bears.
- Between $22,000 and $24,000: 6,600 call options versus 500 put options. The net result is in favor of the purchase instruments (bullish) by $140 million.
- Between $24,000 and $26,000: 9,400 call options versus 0 put options. The bulls take complete control, with a profit of $235 million.
This rough estimate considers put options used in bearish bets and call options exclusively in neutral to bullish trades. Despite this, this oversimplification does not take into account more complex investment strategies.
For example, a trader may have sold a put option, which could gain positive exposure to bitcoin above a specific price, but unfortunately there is no easy way to measure this effect.
Also read: Bitcoin could hit $120,000 in 2023, trader says, as BTC price gains 25% in week
The Bears have until Friday to turn things around.
Bitcoin Bears must push the price below $22,000 on July 22 to avoid a $140 million loss. On the other hand, a slight push above $24,000 is needed for the best case scenario for the bulls to maximize their gains.
Bitcoin only liquidated $222 million in leveraged long positions between July 17 and July 20, so they should need less margin to drive the price higher. In other words, the bulls have a head start in holding BTC above $22,000 before the July 22 options expire.
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