Bitcoin (BTC) briefly broke above $24,000 on July 20, but the excitement lasted less than two hours after the resistance level proved more challenging than expected. On the bright side, the high of $24,280 represents a 28.5% increase from the July 13 swing low of $18,900.
According to Yahoo Finance, Bank of America released its latest survey of fund managers on July 19, and the headline read “I’m so bearish, I’m bullish.” The report cites investor pessimism, expectations of weak corporate earnings and equity allocations at their lowest since September 2008.
The tech-heavy Nasdaq Composite Index’s 4.6% surge between the 18th and 20th of July also gave bulls hope they needed to capitalize on the upcoming July 22nd weekly options expiry.
Global macroeconomic tensions eased on July 20 after Russian President Vladimir Putin confirmed plans to restore flow of the Nord Stream gas pipeline after the ongoing maintenance period. However, data shows that Germany has reduced its reliance on Russian gas from 55% to 35% of its needs over the past few months.
Bears placed their bets at $21,000 or below
Open interest for options expiration on July 22 is $540 million, but the actual figure will be lower as bears were surprised. These traders weren’t expecting a 23% rally from Jul 13 through Ju20 as their bets were targeting $22,000 and below.
Bitcoin options aggregate open interest for July 22nd. Source: CoinGlass
The call-to-put ratio of 1.09 shows the balance between the $280 million call (buy) options and the $260 million put (sell) options. Bitcoin is currently around $23,500, meaning most bearish bets are likely to become worthless.
If the price of Bitcoin stays above $22,000 at 8:00 UTC on July 22, only $30 million worth of these put (sell) options will be available. This difference arises because the right to sell Bitcoin at $22,000 is useless if BTC is trading above this level at expiry.
Bears target $24,000 to secure $235 million in profit
Below are the four most likely scenarios based on current price action. The number of option contracts available on July 22 for call (bull) and put (bear) instruments varies by expiry price. The imbalance in favor of each side represents the theoretical gain:
- Between $20,000 and $21,000: 900 calls vs. 3,000 puts. The net result favors put (bear) instruments by $60 million.
- Between $21,000 and $22,000: 2,400 calls vs. 3,000 puts. The net result is balanced between bulls and bears.
- Between $22,000 and $24,000: 6,600 calls vs. 500 puts. The net result favors call (bull) instruments by $140 million.
- Between $24,000 and $26,000: 9,400 calls vs. 0 puts. The bulls take total control and profit from $235 million.
This rough estimate takes into account the put options used in bearish bets and the call options used exclusively in neutral to bullish trades. Nevertheless, this simplification ignores more complex investment strategies.
For example, a trader could have sold a put option, effectively gaining positive exposure to Bitcoin above a certain price, but unfortunately there is no easy way to gauge this effect.
Related: Bitcoin could hit $120,000 in 2023, trader says as BTC price surges 25% in a week
Bears have until Friday to turn things around
Bitcoin bears need to push the price below $22,000 on July 22 to avoid a $140 million loss. On the other hand, the bulls’ best-case scenario requires a slight push above $24,000 to maximize their gains.
Bitcoin bears had just liquidated $222 million in leveraged long positions July 17-20, so they should need less margin to push the price higher. In other words, bulls have a head start to keep BTC above $22,000 before options expire on July 22.
The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading movement involves risk. You should do your own research when making a decision.
Learn Crypto Trading, Yield Farms, Income strategies and more at CrytoAnswers
https://nov.link/cryptoanswers
Comments are closed.