Bitcoin’s Price Fell Below $30,000, But Professional Traders Remain Bullish
In the past 24 hours, the price of Bitcoin fell 10% today to test the $30,000 support. This decline below what traders have described as key support occurred just two days before the expiration of this month’s futures and options.
Only two days to go until $4 billion worth of options expire. However, both the bullish and bearish sides traded similarly today.
Options are divided into two segments, call and put options. Call options allow the buyer to purchase Bitcoin at a fixed price on the expiration date. Besides, the seller of the instrument will be obliged to carry out the sale of Bitcoin. Generally speaking, they are used in neutral arbitrage trading or bullish strategies.
Put options are commonly used as a hedge, protection against negative price swings.
To understand how these competing forces balance, one must compare the call and put options at each expiration price. Options markets are all or nothing, which means that they have value or are worth nothing if they are traded above the call option’s strike price or the opposite for holders of put options.
The result of today’s activity was neutral for the expiration of Friday’s options
During the last 24 hours, the volume of operations has favoured the most bullish call options by 51%. However, this number is tainted by ultra-bullish strikes valued at $37,000 and up. Given that there are less than 36 hours left before expiration, these contracts are trading below $50 each.
Excluding these overly optimistic strikes, today’s trading added another $95 million in open interest to call options below $35,000. On the other hand, the most bearish put options at $27,000 to $90 million in open interest.
The result of today’s activity was neutral for the expiration of Friday’s options. However, one must check the general open interest imbalance separate from today’s move.
By excluding put options below $27,000 and call options above $35,000, it is easier to estimate the potential impact of Friday’s expiration. Incentives to raise or lower the price by more than 16% become less likely, as the potential gains will rarely exceed the cost.
This data leaves $582 million in call options up to $35,000 for the expiration of the options added on January 29. Meanwhile, the most bearish put options up to $27,000 amount to $422 million. Therefore, there is a $160 million imbalance that favours the more bullish call options.
Considering the volumes traded in the last 24 hours and the open put options, there is not much profit for the bears in pushing Bitcoin below $29,000, at least from an options market point of view.
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