Bitcoin retraces intraday gains as bears aim to pin BTC price under $18K

On Dec. 14, Bitcoin (BTC) broke supra $18,000 for the archetypal clip successful 34 days, marking a 16.5% summation from the $15,500 debased connected Nov. 21. The determination followed a 3% summation successful the S&P 500 futures successful 3 days, which reclaimed the captious 4,000 points support. 

Bitcoin/USD scale (orange, left) vs. S&P 500 futures (right). Source: TradingView

While BTC terms started the time successful favour of bulls, investors anxiously awaited the U.S. Federal Reserve Committee's determination connected involvement rates, on with Fed seat Jerome Powell's remarks. The consequent 0.50% hike and Powell’s mentation of wherefore the Fed would enactment the people of its existent argumentation gave investors bully crushed to uncertainty that BTC terms volition clasp its existent gains starring into the $370 cardinal options expiry connected Dec. 16.

Analysts and traders expect immoderate signifier of softening successful the macroeconomic tightening movement. For those unfamiliar, the Federal Reserve has antecedently accrued its equilibrium expanse from $4.16 trillion successful February 2020 to a staggering $8.9 trillion successful February 2022.

Since that peak, the monetary authorization has been trying to unload indebtedness instruments and exchange-traded funds (ETFs), a process known arsenic tapering. However, the erstwhile 5 months resulted successful little than $360 cardinal of assets decline.

Until there's a clearer usher connected the economical policies of the world's largest economy, Bitcoin traders are apt to stay skeptical of a sustained terms movement, careless of the direction.

Bears placed astir of their bets beneath $16,500

The unfastened involvement for the Dec. 16 options expiry is $370 million, but the existent fig volition beryllium little since bears were caught off-guard aft the determination to $18,000 connected Dec. 14. These traders wholly missed the people by placing bearish bets betwixt $11,000 and $16,500, which seems improbable fixed the marketplace conditions.

Bitcoin options aggregate unfastened involvement for Dec. 16. Source: CoinGlass

The 0.94 call-to-put ratio shows a equilibrium betwixt the $180 cardinal telephone (buy) unfastened involvement against the $190 cardinal enactment (sell) options. Nevertheless, arsenic Bitcoin stands adjacent $18,000, astir bearish bets volition apt go worthless.

If Bitcoin remains supra $18,000 astatine 8:00 americium UTC connected Dec. 16, virtually nary of these enactment (sell) options volition beryllium available. This quality happens due to the fact that a close to merchantability Bitcoin astatine $17,000 oregon $18,000 is worthless if BTC trades supra that level connected expiry.

Bulls tin nett up to $155 million

Below are the 4 astir apt scenarios based connected the existent terms action. The fig of Bitcoin options contracts disposable connected Dec. 16 for telephone (bull) and enactment (bear) instruments varies, depending connected the expiry price. The imbalance favoring each broadside constitutes the theoretical profit:

• Between $16,500 and $17,500: 1,400 calls vs. 1,200 puts. The nett effect is balanced betwixt calls and puts.
• Between $17,500 and $18,000: 3,700 calls vs. 100 puts. The nett effect favors the telephone (bull) instruments by $60 million.
• Between $18,000 and $19,000: 6,200 calls vs. 0 puts. The nett effect favors the telephone (bull) instruments by $115 million.
• Between $19,000 and $19,500: 8,100 calls vs. 0 puts. The nett effect favors the telephone (bull) instruments by $155 million.

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

For example, a trader could person sold a enactment option, efficaciously gaining affirmative vulnerability to Bitcoin supra a circumstantial price, but unfortunately, there's nary casual mode to estimation this effect.

FTX contagion continues to interaction markets

During carnivore markets, it's easier to negatively interaction Bitcoin terms owed to the code of newsflow and its outsized effect connected the crypto market.

Recent antagonistic crypto quality includes reporting connected a U.S. tribunal filing that showed an "unfair" trading vantage for Alameda Research, the market-making and trading institution associated with the bankrupt speech FTX.

The U.S. Commodities Futures Trading Commission alleges that Alameda Research had faster trading execution times and an exemption from the exchange's "auto-liquidation hazard absorption process."

Leading into Dec. 16, the bulls' best-case script requires a pump supra $19,000 to widen their gains to $155 million. This seems improbable considering the lingering regulatory and contagion risks. For now, bears volition apt beryllium capable to unit BTC beneath $18,000 and debar a higher loss.

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.