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Bitcoin Bears Could Lose $440M in Friday’s Options Expiry

BusinessCryptoBitcoin Bears Could Lose $440M in Friday's Options Expiry
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post-bitcoin rejectionB T c) The rally to $26,500 may have appeared to be a victory for the bears, but $24,750 on March 14 was the highest daily close in nine months. Furthermore, bitcoin is up 26.5% since March 10, when the California Department of Financial Protection and Innovation Close Silicon Valley Bank (SVB),

The recent value increase can be attributed to a variety of factors, including an extraordinary $25 billion Grant on 12 March by the Federal Reserve and the United States Treasury, which reduced the systemic risks of banks. Nonetheless, bitcoin bulls are well positioned to take profits of up to $440 million when the weekly options expire on March 17.

How a Silicon Valley bank ran a steady bank run

Prior to its collapse, SVB’s total assets exceeded $200 billion, placing it among the top 20 financial institutions in the United States. Nonetheless, the most direct impact on the cryptocurrency market was $3.3 billion deposits from Circle usd coinusdc) stable currency reserves. Net redemptions of USDC totaled $3 billion between March 13-15, as the stablecoin traded below parity.

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Signature Bank (SI)The shutdown by the New York Department of Financial Services on March 12 increased the negative pressure on crypto markets. Silvergate was more important to the crypto industry as it provided services to several crypto-related businesses including Coinbase, Celsius and Paxos.

This movement could suggest that the $1.2 billion bitcoin weekly options expiration on March 18 will almost certainly benefit bulls. However, a fall in commodity prices, especially oil, could have an impact on cryptocurrencies.

Crude oil at the lowest level since December 2021

Oil prices fell 10% between March 9-15, hitting their lowest level in a year, amid concerns that a banking-sector confidence crisis could trigger a recession and reduce oil demand Is.

US crude stockpiles rose by 1.6 million barrels last week, according to government data released on March 16, which weighed on the market. The increase was higher than the consensus forecast of a 1.2 million barrel build-up.

If the fear of contagion spreads to other markets, bitcoin may struggle to hold the price levels needed to make a profit of $360 million or more at March 17 options expiration.

Bears place more bets, but the vast majority will be in vain

Open interest for the March 17 options expiration is $1.2 billion, but the actual figure will be lower as bears focus their bets on bitcoin trading below $23,500.

Total open interest for bitcoin options 17 Mar. Source: Coinglass

The difference in open interest between the $590 million call (buy) options and $640 million put (sell) options is reflected in the 0.93 call-to-put ratio. However, the expected outcome is likely to be short lived, as the bears took hold on March 13 when the price of bitcoin broke above $23,000.

For example, if the price of bitcoin remains near $24,500 at 8:00 am UTC on March 17, only $32 million in put (sell) options will be available. This difference arises because the right to sell bitcoin at $23,000 or $24,000 is voided if BTC trades above that level at expiration.

Connected: Blockchain Association Asks Fed, FDIC And OCC For Information On ‘De-Banking’ Crypto Firms

The most likely outcome favors the bulls by a wide margin

Below are the four most likely scenarios based on the current price action. The number of options contracts available on March 17 for Call (buy) and Put (sell) instruments varies depending on the expiration price. The imbalance in favor of each side constitutes a theoretical advantage:

  • Between $23,000 and $24,000: 9,900 calls vs 5,800 puts. The net result supports $100 million of call (purchase) instruments.
  • Between $24,000 and $24,500: 11,400 calls vs 3,700 puts. The net result is $185 million in favor of Call Instruments.
  • Between $24,500 and $25,500: 15,100 calls vs 700 puts. The Bulls increased their profit to $360 million.
  • Between $25,500 and $26,000: 17,500 calls vs 300 puts. The Bulls’ profit increased to $440 million.

This rough estimate only considers call options in bullish bets and put options in neutral-to-bearish trades. Yet, this oversimplification excludes more complex investment strategies.

A trader could, for example, sell a call option, effectively gaining downside risk for bitcoin above a specific price, but there is no easy way to estimate this effect.

In order to significantly cut their losses, bitcoin bears must push the price below $24,000 on March 17. However, the bears have little margin to apply downside pressure given the $240 million. liquidation In leveraged short contracts using futures between March 12-15.

The views, opinions and opinions expressed here are solely those of the authors and do not reflect or represent the views and opinions of Cointelegraph.