Značka: BTC Options

Data shows Bitcoin traders’ neutral view ahead of Friday’s $750M BTC options expiry

Bitcoin (BTC) has bounced 11% from the $39,650 low hit on Jan. 10 and, currently, the price is battling with the $44,000 level. There are multiple explanations for the recent weakness, but none of them seem sufficient enough to justify the 42% correction that took place since the Nov. 10 all-time high at $69,000.At the time (Nov. 12), negative remarks from the U.S. Securities and Exchange Commission (SEC) were issued at the rejection of VanEck’s physical Bitcoin exchange-traded fund (ETF). The regulatory body cited the inability to avoid market manipulation due to unregulated exchanges and heavy trading volume based on Tether’s (USDT) stablecoin.Then, on Dec. 17, the U.S. Financial Stability Oversight Council recommended that state and federal regulators review regulations and the tools that could be applied to digital assets. On Jan. 5, BTC price corrected again after the Federal Reserve’s December Federal Open Market Committee (FOMC) session, which confirmed plans to ease debt buyback and likely increase interest rates.Regarding derivatives markets, if Bitcoin price trades below $42,000 by the Jan. 14 expiry, bears will have a $75 million net profit on their BTC options.Bitcoin options aggregate open interest for Jan. 14. Source: CoinglassAt first sight, the $455 million call (buy) options are overshadowing the $295 million puts, but the 1.56 call-to-put ratio is deceptive because the 14% price drop over the last three weeks will likely wipe out most of the bullish bets.If Bitcoin’s price remains below $44,000 at 8:00 am UTC on Jan. 14, only $44 million worth of those call (buy) options will be available at the expiry. There is no value in the right to buy Bitcoin at $44,000 if BTC is trading below that price.Bears might bag a $75 million profit if BTC is below $42,000Here are the four most likely scenarios for the $750 million options expiry on Jan. 14. The imbalance favoring each side represents the theoretical profit. In practice, depending on the expiry price, the quantity of call (buy) and put (sell) contracts becoming active varies:Between $40,000 and $43,000: 480 calls vs. 2,220 puts. The net result is $75 million favoring the put (bear) options.Between $43,000 and $44,000: 1,390 calls vs. 1,130 puts. The net result is balanced between call and put options.Between $44,000 and $46,000: 1,760 calls vs. 660 puts. The net result is $50 million favoring the call (bull) options.Between $46,000 and $47,000: 1,220 calls vs. 520 puts. The net result is $125 million favoring the call (bull) options.This crude estimate considers put options being used in neutral-to-bearish bets and call options exclusively in bullish trades. However, this oversimplification disregards more complex investment strategies.For instance, 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.Related: Traders say Bitcoin run to $44K may be a relief bounce, citing a repeat of December’s ‘nuke’ Bulls need $46,000 for a decent winThe only way bulls can score a significant gain on the Jan. 14 expiry is by sustaining Bitcoin’s price above $46,000. However, if the current short-term negative sentiment prevails, bears could easily pressure the price down 4% from the current $43,800 and raise the profit by up to $75 million if Bitcoin price stays below $42,000.Currently, options markets seem balanced, giving bulls and bears equal odds for Friday’s expiry.The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

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Bitcoin price bounces to $41.5K, but derivatives data shows traders lack confidence

Bitcoin (BTC) briefly reached its lowest level in five months this Monday at $39,650, marking a 42.6% drawdown from the all-time high present on Nov 22, 2022. Some argue that a “crypto winter” has already begun citing the $2.1 billion leverage-long aggregate crypto futures contracts that were liquidated over the past seven days.Bitcoin/USD price at FTX. Source: TradingViewThe descending channel guiding Bitcoin’s negative performance for the past 63 days indicates that traders should expect sub-$40,000 prices by February.Confidence from investors continued to decline after the United States Federal Reserve’s December FOMC session on Jan. 5. The monetary policy authority showed commitment to decrease its balance sheet and increase interest rates in 2022.On Jan. 5, Kazakhstan’s political turmoil added further pressure to the markets. The country’s internet was shut down amid protests and this caused Bitcoin’s network hashrate to tumble 13.4%. Futures traders are still neutralTo analyze how bullish or bearish professional traders are, one should monitor the futures premium , which is also known as the “basis rate.”The indicator measures the difference between longer-term futures contracts and current market levels. A 5% to 15% annualized premium is expected in healthy markets, which is a situation known as contango.This price gap is caused by sellers demanding more money to withhold settlement longer and a red alert emerges whenever this indicator fades or turns negative, which is a scenario known as “backwardation.”Bitcoin 3-month future contracts basis rate. Source: Laevitas.chNotice how the futures market premium did not trade below 7% over the past couple of months. This is an excellent indicator considering the absence of Bitcoin price strength during this period.Options traders are not as bullishTo exclude externalities specific to the futures instrument, one should also analyze the options markets.The 25% delta skew compares similar call (buy) and put (sell) options. This metric will turn positive when fear is prevalent because the protective put options premium is higher than similar risk call options.The opposite holds when greed is the prevalent mood which causes the 25% delta skew indicator to shift to the negative area.Deribit Bitcoin options 25% delta skew. Source: laevitas.chReadings between negative 8% and positive 8% are usually deemed neutral. The last time the 25% delta skew indicator entered the “fear” range at 10% was on Dec 6, 2022.Related: Bitcoin drops below $40K for first time in 3 months as fear set to ‘accelerate’Thus, options markets’ traders are at the very edge of the neutral-to-bearish sentiment because the indicator currently stands at 8%. Moreover, buying protective put options is becoming more expensive, so market markers and arbitrage desks are not confident that $39,650 was the bottom.Overall, the sentiment is pessimistic and the $2.1 billion in aggregate futures contracts liquidations signal that derivatives traders’ longs (buyers) are quickly losing confidence. Only time will tell where the exact bottom is, but presently, there is not an indication of strong support coming from pro traders.The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

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2 key Bitcoin trading metrics suggest BTC price has bottomed

Bitcoin (BTC) has been struggling to sustain the $47,500 support since the Dec. 4 crash, a movement that wiped out over $840 million in leveraged long futures contracts. The downside move came after the emergence of the Omicron variant of the Coronavirus and recent data showing U.S. inflation hitting a 40-year high. Bitcoin/USD price at FTX. Source: TradingViewWhile newcomers might have been scared by the 26% price correction over the past month, whales and avid investors like MicroStrategy added to their positions. On Dec. 9, MicroStrategy announced that they had acquired 1,434 Bitcoin, which increased their stake to 122,478 BTC.According to some analysts, the rationale behind Bitcoin’s weakness was the contagion fear that Evergrande, a leading Chinese property developer, defaulted on its US dollar debt on Dec. 9. The $1.1 Bitcoin billion options expiry on Dec. 10 also could have played an important factor because bears pocketed a $300 million profit.Margin traders are still extremely bullishMargin trading allows investors to leverage their positions by borrowing stablecoins and using the proceeds to buy more cryptocurrency. When those savvy traders borrow Bitcoin, they use the coins as collateral for shorts, meaning they are betting on a price decrease. That is why some analysts monitor the total lending amounts of Bitcoin and stablecoins to gain insight into whether investors are leaning bullish or bearish. Interestingly, Bitfinex margin traders slightly reduced their longs ahead of the Dec. 4 price crash. Bitfinex BTC margin long/total percentage. Source: CoinglassNotice that the indicator held a decent 90% favoring longs, meaning stablecoin borrowing was only 10% of the Bitfinex total. Furthermore, the margin longs recovered by 94% less than 24 hours after the price crash. This suggests that even if those investors were caught by surprise, most held their positions throughout the movement.To confirm whether this movement was specific to the instrument, one should also analyze options markets. The 25% delta skew compares similar call (buy) and put (sell) options. The indicator will turn positive when “fear” is prevalent as the protective put options premium is higher than similar risk call options.The opposite holds when market makers are bullish, causing the 25% delta skew to shift to the negative area. Readings between negative 8% and positive 8% are usually deemed neutral.Deribit Bitcoin options 25% delta skew. Source: laevitas.chThe 25% delta skew ranged near 6% ahead of the Dec. 4 Bitcoin crash, which is considered neutral. Over the next 3 days the options market makers and whales displayed moderate fear as the indicator peaked at 10%, but currently it stands at 3%.The Bitfinex margin long metric and the options main risk metric show few signs of stress in derivatives markets. Considering that these markets are more often used by pro traders, one can begin to believe in the narrative that Bitcoin will claim a new all-time high in early 2022.The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

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Victory is for the taking in Friday’s $950M Bitcoin options expiry

Bitcoin (BTC) price is down this week, and naturally, bears will always find some reversal signal whenever the price shows strength, such as the 8% gain on Nov. 28. Of course, technical analysis is not an exact science, so there is a margin for interpretation and most traders look at multiple timeframes to find a narrative that suits their bias. Currently, BTC price is in a descending channel that started on Oct. 31, and if this pattern plays out, Bitcoin could drop to $50,000 in the short term.Bitcoin/USD price on FTX. Source: TradingViewCryptocurrency markets crashed on Nov. 26 after concern over a new COVID-19 variant sparked a global market sell-off. As Bitcoin dipped below $54,000, bears saw a $215 million potential profit on Dec. 3’s options expiry, but that changed after BTC price regained the $57,000 support.Furthermore, regulatory concerns coming from the United States continue to pressure the market. On Nov. 24, the U.S. Senate Banking Committee chair sought information from stablecoin issuers and exchanges by Dec. 3.In early November, the President’s Working Group on Financial Markets released a report suggesting that stablecoin issuers in the United States should be subject to “appropriate federal oversight” similar to that legislated for banks.Fueled by the potential government interference and negative short-term consequences, Bitcoin bears are likely to profit $80 million on Dec. 3 options expiry.Bitcoin options aggregate open interest for Dec. 3. Source: Coinglass.comAt first sight, the $460 million call (buy) options are evenly matched with the $485 million put (sell) instruments, but the 0.96 call-to-put ratio is deceptive because the 17% price drop from $69,000 will likely wipe out most of the bullish bets.For example, if Bitcoin’s price remains below $57,000 at 8:00 am UTC on Dec. 3, only $24 million worth of those call (buy) options will be available at the expiry. Therefore, there is no value in the right to buy Bitcoin at $60,000 if it is trading below that price.Bears are comfortable with Bitcoin below $57,000Listed below are the four most likely scenarios for the $950 million Dec. 3 options expiry. The imbalance favoring each 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 $54,000 and $56,000: 290 calls vs. 3,480 puts. The net result is $175 million favoring the put (bear) options.Between $56,000 and $58,000: 750 calls vs. 2,160 puts. The net result is $80 million favoring the put (bear) instruments.Between $58,000 and $60,000: 1,510 calls vs. 1,040 puts. The net result is $30 million favoring the call (bull) options.Above $60,000: 2,760 calls vs. 860 puts. The net result is $115 million favoring the call (bull) instruments.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 instance, a trader could have sold a put option, effectively gaining a positive exposure to Bitcoin (BTC) above a specific price. But, unfortunately, there’s no easy way to estimate this effect.Bulls need $58,000 or higher to balance the scalesThe only way for bulls to avoid a loss on Dec. 3’s expiry is by pushing Bitcoin’s price above $58,000, which is 2% away from the current $56,900. However, if the current short-term negative sentiment prevails, bears could exert some pressure and try to score up to $175 million in profit if Bitcoin price stays below $56,000.Currently, options markets data slightly favor the put (sell) options, thus creating opportunities for additional FUD and surprise market crashes.The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

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