The rejection that followed Bitcoin’s (BTC) rally to $26,500 may seem like a win for the bears, but $24,750 on March 14 was the highest daily close in nine months. Additionally, Bitcoin has gained 26.5% since March 10, when Silicon Valley Bank (SVB) was shut down by the California Department of Financial Protection and Innovation.
The recent price surge could be attributed to several factors, including the $25 billion extraordinary funding by the US Federal Reserve and Treasury on March 12, which reduced systemic risks for banks. Nonetheless, Bitcoin bulls are well positioned to take profits of up to $440 million when the weekly options expire on March 17.
How Silicon Valley Bank Triggered a Stablecoin Bank Run
Before its fall, SVB’s total assets exceeded $200 billion, placing it among the top 20 financial institutions in the United States. However, the most direct impact on the cryptocurrency market was the deposit of USD 3.3 billion of Circle’s USD Coin (USDC) stablecoin reserves. USDC net redemptions totaled $3 billion between March 13 and 15, after the stablecoin traded below parity.
Signature Bank, which was shut down on March 12 by the New York Department of Financial Services, added to the negative pressure on crypto markets. But Silvergate was more important to the cryptocurrency industry because it served many cryptocurrency-related companies, including Coinbase, Celsius, and Paxos.
This move may explain why Bitcoin’s $1.2 billion weekly options expiring on March 17 will almost certainly benefit bulls. However, a drop in commodity prices, particularly oil, could have an impact on cryptocurrencies.
Crude at its lowest price since December 2021
Oil prices fell 10% between March 9 and 15, hitting their lowest levels in more than a year amid concerns that a confidence crisis in the banking sector could cause a recession and reduce demand for oil. Petroleum.
According to government data released on March 16, US crude oil inventories increased by 1.6 million barrels last week, adding to the downtrend in the market. The increase was higher than the consensus forecast of a build of 1.2 million barrels.
If the fear of contagion spreads to other markets, Bitcoin may struggle to maintain the price levels needed to make a profit of $360 million or more at the March 17 options expiration.
The bears made more bets, but the vast majority will be worthless
Open interest for the March 17 options expiration is $1.2 billion, but the actual figure will be lower because bears have concentrated their bets on Bitcoin trading below $23,500.
The difference in open interest between the $590 million call options and the $640 million put options is reflected in the call-to-put ratio of 0.93. However, the expected result is likely to be much lower, as the bears were caught off guard when Bitcoin price topped $23,000 on March 13.
For example, if the price of Bitcoin remains near $24,500 at 8:00 am UTC on March 17, there will only be $32 million in put options available. This distinction arises because the right to sell Bitcoin at $23,000 or $24,000 is nullified if BTC trades above that level at expiration.
Related: Blockchain Association Seeks Information From Fed, FDIC And OCC On “Unbanked” Crypto Signatures
Most likely outcomes favor bulls by a wide margin
Below are the four most likely scenarios based on current price action. The number of option contracts available on March 17 for buy (call) and sell (put) instruments varies according to the expiration price. The imbalance in favor of each side constitutes the theoretical benefit:
- Between $23,000 and $24,000: 9,900 calls against 5,800 put options. The net result favors call instruments (purchase) for $100 million.
- Between $24,000 and $24,500: 11,400 calls against 3,700 put options. The net result favors call instruments by $185 million.
- Between $24,500 and $25,500: 15,100 calls against 700 put options. Bulls increase their lead to $360 million.
- Between $25,500 and $26,000: 17,500 calls against 300 put options. The Bulls’ lead increases to $440 million.
This rough estimate considers only call options on bullish bets and put options on neutral to bearish trades. However, this simplification excludes more complex investment strategies.
A trader, for example, could have sold a call option, effectively gaining negative exposure to Bitcoin above a specified price, but there is no easy way to estimate this effect.
To significantly cut their losses, Bitcoin bears need to push the price below $24,000 on March 17. However, the bears have less room to apply negative pressure given the $240 million. settlement in leveraged short contracts using futures between March 12 and 15.
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.
