Bitcoin price corrected, but bulls are positioned to profit in Friday’s $580M BTC options expiry

Bitcoin (BTC) terms has held supra $20,700 for 4 days, fueling bulls' anticipation for different limb up to $23,000 oregon adjacent $25,000. Behind the optimistic determination was a diminution successful inflationary pressure, confirmed by the December 2022 wholesale prices for goods connected Jan. 18. 

The United States shaper terms index, which measures last request prices crossed hundreds of categories besides declined 0.5% versus the erstwhile month.

Eurozone ostentation besides came successful astatine 9.2% year-on-year successful December 2022, marking the 2nd consecutive diminution from October's 10.7% grounds high. A milder-than-expected wintertime reduced the hazard of a state shortages and softened vigor prices, boosting analysts' anticipation of a "soft landing." According to analysts, a brushed landing would debar a heavy recession and perchance person cardinal banks to curb their involvement complaint hikes.

This week's Jan. 20, $580 cardinal BTC options expiry looks similar an casual triumph for bulls due to the fact that the astonishment 7-day 23% rally supra $21,000 caused astir bearish bets to go worthless. The caller determination has holders (or hodlers) calling a marketplace bottommost and the imaginable extremity to the carnivore market, but the options marketplace mightiness clasp the answer.

Can Bitcoin options assistance bulls unafraid the $20,000 floor?

It mightiness look similar distant world close now, but Bitcoin was trading beneath $17,500 conscionable 7 days ago. As the play options expiry connected Jan. 20 approaches, the bullish bets are astir to wage off, portion bears volition spot their options becoming worthless arsenic the deadline looms implicit them.

Bears' main anticipation is the anticipation of the U.S. Federal Reserve (FED) raising involvement rates by 50 ground points astatine the adjacent meeting, but that volition lone hap connected Feb. 1. The latest information connected U.S. retail income person shown a 1.1% retreat successful December, the 2nd consecutive spending cut. The likelihood are progressively favorable for a 25 ground constituent involvement complaint increase, signaling that the cardinal bank's effort to curb ostentation is achieving its expected results.

If bulls triumph connected Jan. 20, they volition apt adhd buying unit and substance the $20,000 enactment level.

Bitcoin bears were caught wholly off-guard

The unfastened involvement for the Jan. 20 options expiry is $580 million, but the existent fig volition beryllium little since bears were decimated aft Bitcoin breached $20,000. Bulls are successful implicit control, adjacent though their payout becomes larger astatine $21,000 and higher.

Bitcoin options aggregate unfastened involvement for Jan. 20. Source: Coinglass

The 1.18 call-to-put ratio reflects the imbalance betwixt the $150 cardinal telephone (buy) unfastened involvement and the $125 cardinal enactment (sell) options. If Bitcoin's terms remains supra $17,000 astatine 8:00 americium UTC connected Jan. 13, little than $2 cardinal worthy of these enactment (sell) options volition beryllium available. This quality happens due to the fact that the close to merchantability Bitcoin astatine $16,500 oregon $15,500 is useless if BTC trades supra that level connected expiry.

$21,000 Bitcoin would springiness bulls a $220 cardinal profit

Below are the 3 astir apt scenarios based connected the existent terms action. The fig of options contracts disposable connected Jan. 20 for telephone (bull) and enactment (bear) instruments varies, depending connected the expiry price. The imbalance favoring each broadside constitutes the theoretical profit:

• Between $19,000 and $20,000: 7,500 calls vs. 1,700 puts. The nett effect favors the telephone (bull) instruments by $110 million.
• Between $20,000 and $21,000: 800 calls vs. 8,100 puts. The nett effect favors the telephone (bull) instruments by $165 million.
• Between $21,000 and $22,000: 10,600 calls vs. 200 puts. The nett effect favors bulls by $220 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 example, a trader could person sold a telephone option, efficaciously gaining antagonistic vulnerability to Bitcoin supra a circumstantial price, but unfortunately, there's nary casual mode to estimation this effect.

Related: Bitcoin sees caller 4-month precocious arsenic US PPI, retail information posts 'big misses'

Bitcoin bears request to propulsion the terms beneath $20,000 connected Friday to minimize the loss. On the different hand, the bulls tin treble their gains by pumping the terms supra $21,000 connected Jan. 20 and profiting by $220 million.

The 7-day rally toward $21,300 liquidated $1.2 cardinal worthy of leverage abbreviated (sell) futures contracts, truthful they mightiness person little borderline required to subdue Bitcoin's price.

For now, bulls are good positioned to nett from the BTC play options expiry and usage the proceeds to support the $20,000 support.

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

This nonfiction does not incorporate concern proposal oregon recommendations. Every concern and trading determination involves risk, and readers should behaviour their ain probe erstwhile making a decision.