crypto strategy

Bitcoin bulls plan to return $23,000 to support as they aim to win the $1 billion options expiry this week

bitcoins (BTC) the price has been trading above $22,500 for 12 days. Of course, this situation may change even if Federal Reserve Chairman Jerome Powell issues positive statements on the economy in today’s post-FOMC statement.

Even if the decision matches the market consensus, the post-meeting statement should be the primary area of ​​focus for investors. Specific areas to focus on would be clues for the next meeting in March.

Disturbing news for the biggest stablecoin Tether (USDT) could also have a significant impact after a Celsius Bankruptcy Examiner’s Report showed that “Tether’s exposure eventually reached over $2 billion” in September 2021. However, it is not known if iFinex – the issuer of Tether – suffered any losses. iFinex chief technology officer Paolo Ardoino denied exposure to Celsius and suggested the reviewer had “mixed up” the prepositions in the report.

Is a sharp stock market correction coming?

Legendary portfolio manager Michael Burry, known for being one of the most vocal critics of the 2007-2008 subprime mortgage crisis, posted a short note on Twitter on Feb. 1 suggesting investors are “selling” .

Although the message has no supporting thesis, one could conclude that Burry expects a significant correction in traditional markets. Given the 40-day correlation between Bitcoin and the S&P 500 at 75%, the chances of a BTC price retracement become obvious.

Therefore, this week’s $1 billion BTC options expiry on Feb. 3 can go both ways, as bears can still flip the tables even if the tide is currently favoring bulls.

Bitcoin bears were caught off guard

Open interest for the Feb. 3 options expiration is $1 billion, but the actual figure will be lower as bears were taken by surprise after the 9.6% rally between Jan. 20 and Jan. 21 .

Bitcoin options aggregate open interest for February 3. Source: Coinglass

The call-to-put ratio of 1.61 reflects the imbalance between the $640 million call open interest and the $400 million put options.

If the price of Bitcoin remains above $23,000 at 8:00 UTC on February 3, less than $7 million of these put options will be available. This difference occurs because the right to sell Bitcoin at $22,000 or $23,000 is useless if BTC is trading above that level at expiry.

Related: Retail giant Pick n Pay will accept Bitcoin in 1,628 stores across South Africa

$23,000 Bitcoin would give the bulls a profit of $180 million

Below are the three most likely scenarios based on the current price action. The number of option contracts available on February 3 for buy (bullish) and sell (bearish) instruments varies depending on the expiry price. The imbalance in favor of each side constitutes the theoretical gain:

  • Between $21,000 and $22,000: 2,700 calls against 10,700 puts. The net result favors the short (bearish) instruments of $165 million.
  • Between $22,000 and $23,000: 4,400 calls versus 4,200 puts. The net result is balanced between call and put options.
  • Between $23,000 and $24,000: 7,800 calls versus 100 puts. The net result favors the buying instruments (bullish) by $180 million.
  • Between $24,000 and $25,000: 12,400 calls versus 0 puts. The bulls extend their earnings to $300 million.

This raw estimate considers call options used in bullish bets and put options exclusively in neutral to bearish trades. Even so, this oversimplification fails to account for more complex investment strategies.

For example, a trader could have sold a call option, effectively gaining negative exposure to Bitcoin above a specific price, but unfortunately there is no easy way to estimate this effect.

Essentially, the Bitcoin bears need to push the price below $22,000 on Feb. 3 to flip the tables and secure a $165 million profit. But, for now, the bulls are well positioned to take advantage of the weekly BTC options expiry and use the proceeds to further defend the $23,000 support.