Regulatory uncertainty and tighter monetary policies continue to affect BTC price, but the data shows that bulls are attempting to incite a reversal.
Market analysis
Bitcoin (BTC) investors appear uncomfortable with adding positions after the most recent 40% correction from the all-time high of $69,000 made on Nov. 10. With a prolonged downtrend, comments from the US Federal Reserve on December 15 about rate hikes are also weighing on risk-on assets.
The Fed signaled that it could raise its benchmark interest rate three times this year and plans to speed up its asset purchases.
As a result, traders worry that these schemes will negatively impact the crypto and traditional markets as liquidity will no longer be “easy”.
Crypto regulation in the US has been in the spotlight lately, and recently a member of the Securities and Exchange Commission’s Investor Advisory Committee called on the agency to expand its public comment on the matter. digital asset regulation.
18, associate professor of law JW Verret addressed the petition with SEC Secretary Vanessa Countryman, and according to Verret, the current path the SEC is taking does not appear to recognize that digital assets are not consistent with the regulatory framework designed for equity investments.
The professor also questioned what requirements the SEC would consider in approving a Bitcoin spot exchange-traded fund.
$590 Million Option Expires on Friday
While Bitcoin is said to be correlated with traditional markets, BTC derivatives traders are not expecting a price below $44,000 by the January 21st option expiration date. $590 million open interest Friday will allow the bears to gain up to $82 million if BTC trades below $41,000 during the expiration.
At first glance, $380 million call (buy) options are vastly superior to $210 million put (sell) options, but 1.81 odds are a scam because as the recent drop in price will likely wipe out most of the bullish bets.
There is no value to the right to buy Bitcoin at $44,000 if it is trading below that price. Thus, if Bitcoin remains below $44,000 at 8 a.m. UTC on January 21, only $64 million of those call (buy) options will be available at expiration.
Bears Are Comfortable With Bitcoin Price Below $42,000
Here are the four most likely scenarios for a $590 million option expiration on Friday. The imbalance in favor of each side represents the theoretical profit. In other words, depending on the expiration price, the number of active call (buy) and put (sell) contracts varies:
- From $40,000 to $41,000: 30 calls versus 3,320 bookings. The net result was $132 million in favor of the put (bear).
- From $41,000 to $42,000: 170 calls versus 2,180 bookings. The net result was $82 million in favor of deal instruments (bears).
- From $42,000 to $44,000: 1,480 calls versus 1,130 bookings. The net result is a balance between a call and a put.
- From $44,000 to $45,000: 2,980 calls versus 630 calls. The net result favors the instruments (increasing in price) $103 million.
This rough estimate considers put options used in down bets and calls exclusively on neutral to bullish trades. However, this over-simplification ignores more complex investment strategies.
Bulls need $44,000 to make $103 million in profit
Regulatory uncertainty and the Federal Reserve’s monetary policies may have been the reason for the recent market weakness, but just a 5% price pump from the current $42,000 is enough for Bitcoin bulls to make $103 million on Friday’s expiration day.
However, if the current short-term negative sentiment prevails, the bears can easily pressure the price below $41,000 and pocket $132 million.
Currently, the options market data is slightly biased towards put (sell), but the results are yet to be seen.
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