Bitcoin bulls to defend $40K leading into Friday's $760M options expiry

Over the past 2 months, Bitcoin (BTC) has respected a somewhat ascending trend, bouncing aggregate times from its support.

Even though that mightiness dependable positive, Bitcoin's show year-to-date remains a lackluster antagonistic 14%. On the different hand, the Bloomberg Commodity Index (BCOM) gained 2% successful the aforesaid period.

Bitcoin/USD 1-day candle chart. Source: TradingView

The broader commodity scale benefited from terms increases successful crude oil, earthy gas, gold, corn, and thin hogs. Worsening macroeconomic conditions pressured the proviso curve, which, successful turn, shifted the equilibrium terms toward a higher level.

Moreover, the United States approved a $1.5 trillion spending bill connected March 15 that funds the authorities done September. President Joe Biden's signing of the authorities averts a authorities shutdown but further pressures the U.S. nationalist debt, present implicit $30.3 trillion.

Still, cryptocurrency traders are increasingly concerned astir the U.S. Federal Reserve complaint hikes expected passim 2022 to incorporate inflationary pressure.

Investors took profits connected riskier assets, causing the U.S. Dollar Index (DXY) to scope its highest level successful 21 months astatine 99.2 connected March 11. The scale measures the dollar's spot against a handbasket of apical overseas currencies.

Bearish bets are mostly beneath $40,000

Bitcoin's betterment supra $40,000 connected March 26 took bears by astonishment arsenic lone 7% of the bearish enactment bets for March 18 person been placed supra specified a terms level.

Bulls mightiness person been fooled by the caller $45,000 absorption trial connected March 1 arsenic their bets for Friday's $760 cardinal options expiry spell each the mode to $65,000.

Bitcoin options aggregate unfastened involvement for March 18. Source: CoinGlass

A broader presumption utilizing the 1.26 call-to-put ratio shows much sizable bets arsenic the telephone (buy) unfastened involvement stands astatine $425 cardinal against the $335 cardinal enactment (sell) options. Nevertheless, arsenic Bitcoin is present backmost supra $40,000, astir bearish bets volition apt go worthless.

For instance, if Bitcoin's terms remains supra $40,000 astatine 8:00am UTC connected March 18, lone $24 cardinal worthy of those enactment (sell) options volition beryllium available. This quality happens due to the fact that determination is nary usage successful a close to merchantability Bitcoin astatine $40,000 if it trades supra that level connected expiry.

Bulls mightiness pouch a $320 cardinal profit

Below are the 3 astir apt scenarios based connected the existent terms action. The fig of options contracts disposable connected March 18 for telephone (bull) and enactment (bear) instruments varies depending connected the expiry price. The imbalance favoring each broadside constitutes the theoretical profit:

• Between $38,000 and $40,000: 1,700 calls vs. 1,300 puts. The nett effect is balanced betwixt the telephone (bull) and enactment (bear) instruments.
• Between $40,000 and $41,000: 3,200 calls vs. 600 puts. The nett effect favors bulls by $105 million.
• Between $41,000 and $42,000: 4,200 calls vs. 300 puts. Bulls boost their gains to $160 million.

This crude estimation considers the telephone options utilized successful bullish bets, and the enactment options exclusively successful neutral-to-bearish trades. Even so, this oversimplification disregards much analyzable concern strategies.

For instance, a trader could person sold a telephone option, efficaciously gaining a antagonistic vulnerability to Bitcoin supra a circumstantial price. But unfortunately, there's nary casual mode to estimation this effect.

Related: Bitcoin risks last 'bear marketplace capitulation' arsenic affluent investors proceed BTC selloff — analyst

Bears person incentives to suppress Bitcoin price

Bitcoin bears request to unit the terms beneath $40,000 connected Friday to debar a $105 cardinal loss. On the different hand, bulls' champion lawsuit script requires a propulsion supra $41,000 to summation their gains to $160 million.

Bitcoin bulls had $98 cardinal leverage agelong positions liquidated connected March 16, truthful there's little inducement to propulsion the terms higher successful the abbreviated term. With this said, bulls volition apt effort to support $40,000 enactment until March 18 options expiry.

The views and opinions expressed present are solely those of the author and bash not needfully bespeak the views of Cointelegraph. Every concern and trading determination involves risk. You should behaviour your ain probe erstwhile making a decision.