Derivatives data suggests that sentiment-wise, pro traders are still neutral on Bitcoin’s price prospects ahead of Friday’s $750 million options expiry.

Bitcoin (BTC) has bounced 11% from the $39,650 low made 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 regulator 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 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: Coinglass

At 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 $42,000

Here 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 (BTC) above a specific price. But, unfortunately, there's no easy way to estimate this effect.

Bulls need $46,000 for a decent win

The 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 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.

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.

Cryptos feed Join Telegram

Recommended content


Recommended Content

Editors’ Picks

Bitcoin Weekly Forecast: Assessing likelihood of 80% rally for BTC before 2023

Bitcoin Weekly Forecast: Assessing likelihood of 80% rally for BTC before 2023

Bitcoin price action over the last 72 hours indicates that a massive bullish move is coming. In the last two articles, we have taken a look at why this is possible from a technical and on-chain perspective. 

More Bitcoin News

Luna Classic price: Binance burned 6 billion LUNC, triggering massive rally in the altcoin

Luna Classic price: Binance burned 6 billion LUNC, triggering massive rally in the altcoin

Luna Classic (LUNC) price witnessed a massive spike on Friday, after yielding 12% gains overnight. The move came after the world’s largest crypto exchange, Binance announced it would be burning 6.39 billion LUNC tokens. 

More Luna Classic News

Binance native token BNB and staking derivatives bleed after $5 million DeFi exploit on Ankr Protocol

Binance native token BNB and staking derivatives bleed after $5 million DeFi exploit on Ankr Protocol

Binance’s native token BNB suffered a 3% decline in response to the $5 million exploit on DeFi protocol Ankr Protocol. The BNB chain-based protocol confirmed that it has fallen victim to a multi-million dollar exploit. 

More Binance Coin News

Cardano price gets underpinned, could move 10% north before New Year

Cardano price gets underpinned, could move 10% north before New Year

Cardano (ADA) price action is trading in more quiet waters as the spillover effects and aftermath of FTX and BlockFi bankruptcies are finally easing into the background. 

More Cardano News

Bitcoin Weekly Forecast: Assessing likelihood of 80% rally for BTC before 2023

Bitcoin Weekly Forecast: Assessing likelihood of 80% rally for BTC before 2023

A massive bullish move is coming. In the last two articles, we have taken a look at why this is possible from a technical and on-chain perspective. In this weekly forecast, we will take a look at Bitcoin’s monthly performance for the last decade and determine if this bullish outlook is possible. 

Read full analysis

BTC

ETH

XRP