Bitcoin bears could face $440M loss in Friday's options expiry

The rejection that followed Bitcoin's (BTC) rally to $26,500 whitethorn look to beryllium a triumph for bears, but $24,750 connected March 14 was the highest regular adjacent successful 9 months. Furthermore, Bitcoin has gained 26.5% since March 10, erstwhile the California Department of Financial Protection and Innovation shut down Silicon Valley Bank (SVB).

The caller terms summation could beryllium attributed to assorted factors, including the bonzer $25 cardinal funding by the Federal Reserve and the United States Treasury connected March 12, which reduced banks' systemic risks. Nonetheless, Bitcoin bulls are good positioned to nett up to $440 cardinal erstwhile play options expire connected March 17.

How Silicon Valley Bank triggered a stablecoin slope run

Before its downfall, SVB's full assets surpassed $200 billion, placing it among the apical 20 fiscal institutions successful the United States. Nonetheless, the astir nonstop interaction connected the cryptocurrency marketplace was the $3.3 cardinal deposit from Circle's USD Coin (USDC) stablecoin reserves. USDC's nett redemptions totaled $3 cardinal betwixt March 13-15, arsenic the stablecoin traded beneath parity.

Signature Bank (SI), closed down on March 12 by the New York Department of Financial Services, added to the antagonistic unit connected crypto markets. Silvergate was much important to the crypto manufacture due to the fact that it provided services to galore crypto-related businesses, including Coinbase, Celsius and Paxos.

This question whitethorn explicate wherefore the $1.2 cardinal Bitcoin play options expiry connected March 18 volition astir surely payment bulls. However, a driblet successful commodity prices, peculiarly for oil, could person an interaction connected cryptocurrencies.

Crude lipid astatine its lowest terms since December 2021

Oil prices fell 10% betwixt March 9-15, reaching their lowest levels successful implicit a year, amid concerns that a banking-sector assurance situation could origin a recession and trim lipid demand.

According to authorities information released connected March 16, U.S. crude stockpiles accrued by 1.6 cardinal barrels past week, adding to marketplace bearishness. The summation was higher than the statement forecast of a 1.2 cardinal tube build-up.

If the fearfulness of contagion spreads to different markets, Bitcoin whitethorn conflict to support the terms levels required to nett $360 cardinal oregon much connected the March 17 options expiry.

Bears placed much bets, but the immense bulk volition beryllium worthless

Open involvement for the March 17 options expiry is $1.2 billion, but the existent fig volition beryllium little due to the fact that bears person concentrated their bets connected Bitcoin trading beneath $23,500.

Bitcoin options aggregate unfastened involvement for March 17. Source: CoinGlass

The quality successful unfastened involvement betwixt the $590 cardinal telephone (buy) options and the $640 cardinal enactment (sell) options is reflected successful the 0.93 call-to-put ratio. The expected outcome, however, is apt to beryllium overmuch lower, arsenic bears were caught disconnected defender erstwhile Bitcoin's terms surged supra $23,000 connected March 13.

For example, if the terms of Bitcoin remains adjacent $24,500 astatine 8:00 a.m. UTC connected March 17, determination volition lone beryllium $32 cardinal successful enactment (sell) options available. This favoritism arises due to the fact that the close to merchantability Bitcoin astatine $23,000 oregon $24,000 becomes null if BTC trades supra that level connected expiry.

Related: Blockchain Association seeks info from Fed, FDIC and OCC connected ‘de-banking’ crypto firms

The astir apt outcomes favour bulls by a wide margin

Below are the 4 astir apt scenarios based connected existent terms action. The fig of options contracts disposable connected March 17 for telephone (buy) and enactment (sell) instruments varies depending connected the expiry price. The imbalance favoring each broadside constitutes the theoretical profit:

• Between $23,000 and $24,000: 9,900 calls vs. 5,800 puts. The nett effect favors the telephone (buy) instruments by $100 million.
• Between $24,000 and $24,500: 11,400 calls vs. 3,700 puts. The nett effect favors the telephone instruments by $185 million.
• Between $24,500 and $25,500: 15,100 calls vs. 700 puts. Bulls summation their vantage to $360 million.
• Between $25,500 and $26,000: 17,500 calls vs. 300 puts. Bulls' vantage increases to $440 million.

This unsmooth estimation considers lone telephone options successful bullish bets and enactment options successful neutral-to-bearish trades. Nonetheless, this oversimplification excludes much analyzable concern strategies.

A trader, for example, could person sold a telephone option, efficaciously gaining antagonistic vulnerability to Bitcoin supra a circumstantial price, but determination is nary casual mode to estimation this effect.

To importantly trim their losses, Bitcoin bears indispensable propulsion the terms beneath $24,000 connected March 17. However, bears person little borderline to use antagonistic unit fixed the $240 cardinal liquidation successful leveraged abbreviated contracts utilizing futures betwixt March 12-15.

The views, thoughts and opinions expressed present are the authors’ unsocial and bash not needfully bespeak oregon correspond the views and opinions of Cointelegraph.