The jaw-breaking $3.2 billion Bitcoin options expiry could kick-start a new rally, according to experts who are calling the move “a game changer for bitcoin” that could push BTC up by as much as 10% on Monday morning.
The “bitcoin options expiring” is a term that refers to the expiration of trading contracts for bitcoin. The “Friday’s jaw-breaking $3.2B Bitcoin options expiry could kick-start a new rally” is a headline from CNBC that discusses how the expiration of these contracts could lead to a new rally in price.
Since its all-time high of $67,000 on Oct. 20, only one day after ProShares’ Bitcoin Strategy ETF (BITO) launched on Nasdaq, Bitcoin (BTC) has been trading in a falling channel pattern.
Bulls, on the other hand, have enough motivation to push Bitcoin’s price beyond $60,000 on Oct. 29, when the $3.2 billion monthly options expiration settles.
Coinbase’s bitcoin pricing in US dollars. TradingView is the source of this information.
Investors are still split on the exchange-traded fund’s acceptance, despite the fact that it has amassed $1 billion in assets under management in only 48 hours. Either market expectations for these funds were ridiculously high, or the 42 percent rise from October 1 to October 19 had already been factored in.
Regulatory uncertainty in the United States has also deterred several big institutional investors from investing in the industry. Rostin Behnam, the interim head of the Commodity Futures Trading Commission (CFTC), compared the government agency’s enforcement of the digital asset market to a beat officer on patrol during a Senate Committee hearing on Oct. 26.
Behnam continued:
“Right present, market transactions account for a significant portion of the risk that digital assets entail.”
The bulls might make a $715 million profit.
These comments would normally have little to no influence on a bullish market, raising the issue of whether the 13 percent fall from the all-time high on Oct. 20 indicates the end of a positive cycle.
The monthly expiration on Oct. 29 will be a strong test for bears, as any price over $58,000 represents a profit of $385 million or more for bulls.
Open interest in bitcoin options on the 29th of October. Bybt is the source.
On the surface, the $1.94 billion call (buy) options seem to have a 56 percent lead over the $1.24 billion put (sell) options.
The 1.56 call-to-put ratio, on the other hand, is misleading since bears were taken off guard and will lose most of their put options if Bitcoin’s price stays over $58,000 at 8:00 a.m. UTC on Oct. 29.
If the price of Bitcoin is trading over $55,000, owning a put option, which is the right to sell Bitcoin at that price, is useless.
Above $58,000, the bulls are at ease.
Sixty-eight percent of the put options, which represent the right to sell Bitcoin at a certain price, have been set at $58,000 or less.
The four most probable possibilities, based on current pricing levels, are shown below. In addition, the data reveals how many contracts for bulls (calls) and bears (puts) will be available on Oct. 20.
- 6,500 calls vs. 6,530 puts between $52,000 and $55,000. Bulls and bears are evenly matched in the end.
- 9,510 calls vs. 4,610 puts between $55,000 and $58,000. The net outcome is $270 million in favor of bulls.
- 9,900 calls vs. 3,490 puts between $58,000 and $60,000. The net outcome is still $385 million in favor of bulls.
- Over $60,000, there are 13,870 calls and 1,970 puts. Bulls will gain $715 million as a consequence of the deal.
The notional profit from the expiration is represented by the imbalance favoring either side, as seen above.
Call (buy) options are employed in bullish tactics, whereas put (sell) options are used primarily in neutral-to-bearish transactions. A trader, on the other hand, may have sold a put option to earn positive exposure to Bitcoin above a certain price. Regrettably, there is no simple method to calculate this impact.
Is it possible for bears to push Bitcoin below $55,000?
To avert a $270 million loss, the Bears require a 6% decline from their current $58,500 price. Traders must also account for the positive momentum brought on by the ETF approval, which may not seem to be much at first.
Bulls are expected to win by maintaining Bitcoin above $59,000 with less than 36 hours before the Oct. 29 expiration. The route to sub-$55,000 for the bears seems remote, but it may be worthwhile.
The author’s thoughts and opinions are purely his or her own and do not necessarily represent those of Cointelegraph. Every investing and trading decision has some level of risk. When making a choice, you should do your own research.
The “bitcoin contracts expire may 2021” is a rumor that has been circulating the internet. The expiration of bitcoin options could kick-start a new rally for bitcoin.
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