Bitcoin (BTC) has been trading in a downtrend since the strong rejection of $ 53,000 on September 7, and the liquidation of $ 3.4 billion futures contracts, as well as China’s ban on cryptocurrency trading, They seem to have seriously affected the morale of the merchants.
To add to the negative sentiment, major crypto exchanges such as Binance and Huobi have halted some services in mainland China, and some of Ethereum’s largest mining pools, such as Sparkpool and BeePool, have been forced to shut down entirely.
Bitcoin price in USD on Coinbase. Source: TradingView
Based on the graph above, it is possible to understand why buyers placed 80% of their bets at $ 44,000 or more. However, the last two weeks have definitely made these call options lose value.
On September 25, the People’s Bank of China (PBoC) domestically banned crypto companies and banned companies from providing financial transactions and services to market participants. The news triggered an 8% drop in the price of Bitcoin, as well as a broader pullback in altcoins.
The bearish sentiment was confirmed after Tesla CEO Elon Musk voiced his support for the cryptocurrency at the Code Conference in California.
“It is not possible, I think, to destroy cryptocurrencies, but it is possible for governments to slow down their progress.”
Had we been in a neutral to bullish market, these comments would have likely reversed the negative trend. For example, on July 21, Elon Musk said that Bitcoin had already reached its benchmark for renewables. As a result, the price of Bitcoin, which previously fell 12% in ten days, reversed the trend and increased by 35% over the next ten days.
The October 1 expiration will be a test of strength for the bulls, as any price below $ 42,000 spells a bloodbath with absolute dominance of the put options.
The Bitcoin Options Pool Interest is open for October 1. Source: Bybt.com
Initially, bullish neutral instruments of $ 285 million dominated weekly maturity by 21% compared to put options of $ 320 million.
However, the 1.21 call-put ratio is misleading as the excessive optimism seen in the bulls could wipe out most of your bets if the Bitcoin price remains below $ 43,000 at 8:00 UTC on Friday. .
After all, what good is the right to acquire Bitcoin at $ 50,000 if it is trading below that price?
The bears were also caught off guard.
Sixty-six percent of put options, where the buyer owns the right to sell Bitcoin at a preset price, were placed at $ 42,000 or less. These bearish neutral instruments will lose their value if Bitcoin trades above this price on Friday morning.
Below are the four most likely scenarios that take into account current price levels. The imbalance in favor of each side represents the potential benefit of expiration.
The data shows how many contracts will be available on Friday, based on the expiration price.
Between $ 40,000 and $ 41,000: 110 calls against 4,470 put options. The net result is $ 175 million in favor of Bear Protective Instruments.
Between $ 41,000 and $ 43,000: 640 calls against 4,000 put options. The bottom line continues to favor the bears at $ 140 million.
Between $ 43,000 and $ 45,000: 1,780 calls versus 2,070 put options. The net result is balanced between bears and bulls.
Above $ 45,000: 2,530 call versus 1,090 put. The net result moves in favor of the bulls at $ 65 million.
This gross estimate considers the call options used in bullish strategies and the put options exclusively in neutral to bearish operations. Unfortunately, real life is not that simple as more complex investment strategies may be in place.
For example, a trader could have sold a put option, thus gaining positive exposure to Bitcoin above a specific price. Therefore, there is no easy way to estimate this effect, so the simple analysis above is a good estimate.
As it stands, the bears have absolute control over the October 1 expiration and have good reason to continue pushing the price below $ 43,000.
Unless unexpected buying pressure emerges over the next 12 hours, the amount of capital required for the bulls to force the market above the $ 45,000 threshold seems immense and unwarranted.
On the other hand, bears need a negative 5% price change that brings BTC below $ 41,000 to increase their lead by $ 35 million. Therefore, this movement also shows little return for the amount of effort required.
The bull’s only hope lies in a positive surprise for the price of Bitcoin before October 1 at 8:00 UTC. If any sensible action is taken, it will likely take place on the weekend, when there is less active flow.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trade movement involves risk. You must do your own research before making a decision.