Regulation remains the top concern for Bitcoin bulls, especially after the Commodity Futures Trading Commission (CFTC) sued Binance for trading and derivatives law violations. The regulator wants Binance to pay for trading profits, income, salaries, commissions, loans, and fees it received from US citizens, as well as pay civil penalties for violations.
The rise in Bitcoin’s price was also driven by a shift in sentiment towards risky assets after US Federal Reserve Chairman Jerome Powell said interest rate hikes are no longer an option. the default measure to curb inflation. The central bank understood that the current situation would likely “result in tighter credit conditions for households and businesses, which in turn would affect economic outcomes.”
Fixed income investors earn more when interest rates rise, so buying stocks and commodities becomes less attractive. As a result, by reversing the strategy and adding $339 billion in liabilities in two weeks, the Fed opted to contain the banking crisis, which may send inflation out of control.
Given the risky asset build scenario, Bitcoin bulls can take profits of up to $1.4 billion on the monthly options expiration on Friday.
Bitcoin Bears Were Caught Completely Unprepared
Open interest for the March 31 options expiration is $4.2 billion, but the actual figure will be lower as bears expected price levels below $26,500. These traders were caught off guard when Bitcoin gained 32% between March 12 and 17.
The call-to-put ratio of 1.34 reflects the imbalance between the call open interest of $2.4 billion and the put options of $1.8 billion. However, if the Bitcoin price remains near $28,000 at 8:00 am UTC on March 31, only $25 million of these put options will be available. This difference occurs because the right to sell Bitcoin at $26,000 or $27,000 is worthless if BTC trades above that level at expiration.
Bulls target $29,000 to secure record $1.4 billion profit
Below are the four most likely scenarios based on current price action. The number of option contracts available on March 31 for call (bull) and put (bear) instruments varies according to the expiration price. The imbalance in favor of each side constitutes the theoretical benefit:
- Between $25,000 and $26,000: 27,200 calls against 12,700 put options. The net result favors the call instruments (bull) for $360 million.
- Between $26,000 and $27,000: 32,300 calls against 8,500 put options. The net result favors the call instruments (bull) for $620 million.
- Between $27,000 and $28,000: 38,100 calls against 3,000 put options. The bulls increase their lead to $1.2 billion.
- Between $28,000 and $30,000: 48,300 calls against 400 put options. The bulls dominate with a profit of $1.4 billion.
This crude estimate considers call options used in bullish bets and put options exclusively in neutral to bearish trades. Even so, this simplification ignores more complex investment strategies.
For example, a trader could have sold a call option, effectively gaining negative exposure to Bitcoin above a specified price, but unfortunately, there is no easy way to estimate this effect.
Related: ‘Definitely Not Bullish’: Bitcoin Price Gains of 7% Fail to Convince Traders
Bears best hope rests on regulatory FUD
Bitcoin bulls need to push the price above $29,000 by March 31 to lock in a potential $1.4 billion gain. Bear’s best chance, on the other hand, is more regulatory FUD on stablecoins or major crypto exchanges, which has so far been unsuccessful.
Considering the bullish momentum created by the Fed’s inability to continue raising interest rates, bulls are well positioned for the monthly BTC options expiration in March. Those gains will most likely be used to further strengthen the $28,000 support, so the expected outcome is especially worrisome for the bears.
The price of Bitcoin (BTC) has hovered around $28,000 for the past ten days, but the cryptocurrency has gained 70.5% year to date. As of March 17, Bitcoin was trading below $25,000 and this explains why most of the bearish bets for the $4.2 billion options expiration in March were placed at or below $26,500.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should do their own research when making a decision.
The views, thoughts and opinions expressed here are those of the authors alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
