Bitcoin price is no longer in reach of $40,000, but data shows bulls are willing to take a few short-term losses in order to strengthen their next run at the key resistance level. The past few months have been less than pleasant for Bitcoin (BTC) bulls, but they are not alone. Persistent comments from the United States Federal Reserve hint at plans to raise interest rates in 2022 and thi is causing investors to seek protection in inflation-protected bonds.
The monetary authority signaled its intention to substantially raise the benchmark interest rate and they will also gradually reduce the monthly purchase of debt assets.
Even though some crypto investors deem Bitcoin digital scarcity as inflationary protection, that does not change its volatility. In turn, it causes the asset price to move in tandem with risk markets.
The above chart shows Bitcoin price in blue stacked against the smaller U.S. listed companies, as measured by the Russell 2000 equity markets index. Unlike the S&P 500 or Dow Jones Industrial Index, this benchmark excludes those tech giants. Thus, the smaller companies are usually considered riskier and are more impacted when investors fear an economic downturn.
However, the negative performance did not scare investors as the Canada-based Purpose Bitcoin ETF attracted over $38 million worth of Bitcoin this Tuesday, its third-largest daily inflow to date. The fund now holds 31,032 BTC, equivalent to $1.2 billion.
Regardless of investors' sentiment, Bitcoin bulls could face a $120 million loss if BTC price moves below $36,000 on Friday's options expiry.
According to Friday's options expiry open interest, Bitcoin bulls placed heavy bets between $40,000 and $44,000. These levels might seem optimistic right now, but Bitcoin was trading above $42,000 two weeks ago. At first sight, the $430 million call (buy) options dominate the $300 million put (sell) instruments, but the 1.43 call-to-put ratio does not really tell the whole story. For example, the 14% price drop over the past two weeks wiped out most bullish bets.
A call option gives the buyer a right to buy BTC at a fixed price at 8:00 am UTC on Feb. 4. However, if the market is trading below that price, there is no value in holding that derivative contract, so its value goes to zero.
Therefore, if Bitcoin remains below $37,000 at 8:00 am UTC on Feb. 4, only $34 million of those call (buy) options will be available at the expiry.
Here are the three most likely scenarios for Friday's options expiry. The imbalance favoring each side represents the theoretical profit. In other words, depending on the expiry price, the active quantity of call (buy) and put (sell) contracts varies:
This crude estimate considers call options used in bullish bets and put options exclusively in neutral-to-bearish trades. However, this oversimplification disregards more complex investment strategies.
A mere 3% price pump from the current $36,900 level is enough for Bitcoin bulls to avoid a $120 million loss on the Feb. 4 options expiry. Still, the same rationale applies to Bitcoin bears because pinning BTC below $37,000 can easily cause them to secure a $120 million profit.
Considering the short-term negative sentiment caused by tighter macroeconomic conditions, Bitcoin bulls should pace their energy for a sustainable recovery to $40,000 and higher instead of wasting efforts right now. Therefore, options markets data slightly favor the put (sell) options.
|#||Crypto||Prediction||Accuracy||CVIX||Price||24h||7d||Market Cap||7d price change|
|1||BTC||Bitcoin predictions||61.2%||79||$28 532.89||-0.14%||3.93%||$551 670 149 541|
|2||ETH||Ethereum predictions||68.8%||61||$1 824.10||-0.20%||4.92%||$219 727 600 320|
|3||USDT||Tether predictions||92.8%||1||$1.000316||0.02%||-0.05%||$79 719 012 525|
|4||BNB||Binance Coin predictions||74.4%||55||$315.64||-0.57%||-2.11%||$49 835 690 238|
|5||USDC||USD Coin predictions||92.8%||2||$0.999876||0%||0.01%||$32 523 408 102|
|6||XRP||XRP predictions||61.2%||82||$0.511375||-5.49%||14.38%||$26 426 923 668|
|7||HEX||HEX predictions||64.8%||68||$0.079733||-11.69%||-4.21%||$13 826 597 050|
|8||ADA||Cardano predictions||76.8%||41||$0.395366||-1.54%||12.31%||$13 736 058 748|
|9||DOGE||Dogecoin predictions||82%||23||$0.082097||6.31%||11.45%||$11 392 170 316|
|10||STETH||Lido stETH predictions||91.2%||1||$2 941.39||-0.40%||-3.32%||$10 258 752 564|
|11||MATIC||Polygon predictions||84.8%||26||$1.12||-0.51%||3.83%||$10 126 762 079|
|12||SOL||Solana predictions||79.2%||36||$21.17||-1.11%||3.92%||$8 163 446 069|
|13||BUSD||Binance USD predictions||93.2%||1||$0.999556||-0.03%||-0.01%||$7 553 833 722|
|14||DOT||Polkadot predictions||83.6%||28||$6.34||0.07%||7.60%||$7 432 742 823|
|15||LTC||Litecoin predictions||71.6%||50||$92.91||3.13%||1.69%||$6 746 413 734|
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