Bitcoin (BTC) price has been trading above $22,500 for 12 days. Of course, this situation may change even if Federal Reserve Chairman Jerome Powell delivers positive statements on the economy at today’s post-FOMC press conference.
Even if the decision coincides with the market consensus, the post-meeting statement should be the main area of attention for investors. Specific areas to focus on would be clues for the next meeting in March.
Worrying news for the largest stablecoin Tether (USDT) could also have a significant impact after a report from Celsius bankruptcy examiner showed that “Tether exposure eventually grew to over $2 billion” in September 2021. However, it is not clear if iFinex, the issuer of Tether. — suffered losses. iFinex CTO Paolo Ardoino denied the Celsius exposure and suggested that the examiner had “muddled up” the prepositions in the report.
Is a sharp correction in the stock market coming?
Legendary portfolio manager Michael Burry, known for being one of the most vocal critics of the subprime crisis of 2007 and 2008, posted a short note on Twitter on February 1, suggesting that investors “sell.”
Although the message lacks a supporting thesis, one could conclude that Burry expects a significant correction in the traditional markets. Considering the 40-day correlation between Bitcoin and the S&P 500 Index at 75%, the odds of a BTC price pullback become apparent.
Consequently, the $1 billion BTC options expiration on February 3 this week can go either way because the bears can still turn the tables as the tide currently favors the bulls.
Bitcoin Bears Were Caught Completely Unprepared
Open interest for the February 3 options expiration is $1 billion, but the actual number will be lower as bears were surprised after the 9.6% rally on January 20-21.
The call-to-put ratio of 1.61 reflects the imbalance between the $640 million call open interest and the $400 million put options.
If the Bitcoin price sustains above $23,000 at 8:00 am UTC on February 3, less than $7 million worth of these put options will be available. This difference occurs because the right to sell Bitcoin at $22,000 or $23,000 is worthless if BTC trades above that level at expiration.
Related: Retail Giant Pick n Pay Will Accept Bitcoin In 1,628 Stores In South Africa
$23,000 Bitcoin would give the bulls a profit of $180 million
Below are the three most likely scenarios based on current price action. The number of option contracts available on February 3 for call (bull) and put (bear) instruments varies, depending on the expiration price. The imbalance in favor of each side constitutes the theoretical benefit:
- Between $21,000 and $22,000: 2,700 calls against 10,700 put options. The net result favors put (bear) instruments by $165 million.
- Between $22,000 and $23,000: 4,400 calls vs. 4,200 put options. The net result is balanced between call and put options.
- Between $23,000 and $24,000: 7,800 calls against 100 put options. The net result favors the call instruments (bull) by $180 million.
- Between $24,000 and $25,000: 12,400 calls against 0 sales options. The Bulls extend their earnings to $300 million.
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.
In essence, Bitcoin bears need to push the price below $22,000 on February 3 to turn the tables and secure a $165 million profit. But for now, the bulls are well positioned to benefit from the expiration of BTC weekly options and use the gains to further defend the $23,000 support.
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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.
