Two or three weeks in the past, when Bitcoin (BTC) was buying and selling beneath $52,000, a dealer betting on $65,000 by Oct. 22 would have been thought-about extraordinarily optimistic. The truth that 98% of the put (promote) choices for Bitcoin’s weekly choices expiry on Oct. 22 has been positioned beneath that worth proves that that is true.
Quick ahead to this week, and the profitable launch of the first BTC exchange-traded fund (ETF) in the United States and news that Digital Currency Group (DCG), the parent company of the Grayscale Bitcoin Trust, increased its limit to acquire up to $1 billion worth of GBTC shares, boosted Bitcoin worth to new all-time highs.
The $40.5 billion funding automobile has been obtainable for buying and selling on United States markets since March 2015, and it just lately filed a request to the US Securities and Trade Fee (SEC) to transform its GBTC product to an ETF.
The parabolic transfer to the $67,000 all-time excessive on Oct. 20 has additionally been fueled by billionaire investor Carl Icahn’s bullish remarks. With 4 a long time of splendid returns, Icahn warned of an impending monetary disaster and highlighted Bitcoin’s power as an inflationary hedge.
Moreover, Vasiliy Shpak, Russia’s deputy minister of Business and Commerce, reportedly filed a proposal to make use of the nation’s oil exploration gas production to power cryptocurrency mining. The Russian government has attempted to reduce gas flaring to cut emissions but has struggled to meet targets due to its underdeveloped infrastructure.
Even though Oct. 22’s $1.8 billion options expiry is a landslide victory for bulls, it wasn’t like that a couple of weeks ago.
At first sight, the $1 billion call (buy) options dominate Oct. 22 expiry by a mere 23% compared to the $810 million puts (sell) instruments.
However, the 1.23 call-to-put ratio is deceptive because the recent rally will likely wipe out most of the bearish bets if Bitcoin’s price remains above $64,000 at 8:00 am UTC on Oct. 22. There is no value on a right to sell Bitcoin at $60,000 if it’s trading above that price.
Bulls seem pretty comfortable above $65,000
Below are the four most likely scenarios for the Oct. 22 expiry. The imbalance favoring either side represents the theoretical profit. In other words, depending on the expiry price, the quantity of call (buy) and put (sell) contracts becoming active varies:
- Between $60,000 and $62,000: 8,670 calls vs. 3,070 puts. The net result is $335 million favoring the call (bull) instruments.
- Between $62,000 and $64,000: 10,780 calls vs. 2,100 puts. The net result is $540 million favoring the call (bull) instruments.
- Between $64,000 and $66,000: 13,050 calls vs. 280 puts. The net result is $830 million favoring the call (bull) instruments.
- Above $68,000: 13,680 calls vs. 20 puts. The net result is complete dominance, with bulls profiting $940 million.
This crude estimate considers call options being used in bullish bets and put options exclusively in neutral-to-bearish trades. However, this oversimplification disregards more complex investment strategies.
For example, a trader could have sold a put option, effectively gaining a positive exposure to Bitcoin above a specific price. But, unfortunately, there’s no easy way to estimate this effect.
Bears need a 7% price correction to reduce their loss
In each of the scenarios drawn above, bulls have absolute control of Oct. 22’s expiry. This week’s positive newsflow leaves little reason for investors to take profit or accept a price correction ahead of the expiry. On the other hand, bears need a 7% move below $62,000 to avoid an $830 million loss.
Traders must consider that during bull runs, the amount of effort a seller needs to pressure the price is immense and usually ineffective. Currently, options markets data point to a considerable advantage from call (buy) options, fueling even more bullish bets for the monthly expiry on Oct. 29.
The views and opinions expressed here are solely those of the author and don’t essentially replicate the views of Cointelegraph. Each funding and buying and selling transfer includes danger. It is best to conduct your personal analysis when making a call.