Bitcoin bulls are still trying to regain strength after the bloody correction on December 4th that saw the price drop from $ 57,000 to $ 42,000. That 26.5% decline resulted in the liquidation of long futures positions valued at $ 850 million, but more importantly, it pushed the Fear and Greed Index to its lowest level since July 21st.
It’s strange to compare the two events as the low of under $ 30,000 on July 21 undone all gains in 2021. Meanwhile, the S&P 500 is up 21% and the WTI oil price is up 41% in 2021.
The bulls could focus on Bitcoin stocks on the exchanges, which continue to decline and are currently at a three-year lows. According to data from CryptoQuant, there is currently less than 2.27 million BTC on the exchanges and there is less BTC available for trading, suggesting that investors are reluctant to sell in the short term. This is a driving force that many investors believe will increase the price.
Even with a clear balance between a $ 1.1 billion call and put option that expires tomorrow, the bears are better positioned after Bitcoin stabilized at just over $ 50,000.
A broader view using the call-to-put ratio reveals a modest 7% advantage for bitcoin bulls, as $ 555 million call options have a large open interest (OI) than the put options of $ 520 million. The 1.07 indicator is far from accurate, however, as the 11.5% price drop over the past week has rendered most bullish bets worthless.
For example, if Bitcoin price is still below $ 52,000 at 3:00 p.m. on December 10, there will be only $ 50 million in call options. The right to buy Bitcoin for $ 55,000 has no value if BTC is trading below that price.
Bears will try to keep Bitcoin below $ 50,000
Bitcoin bears need a gentle push under $ 50,000 for a profit of $ 300 million. On the flip side, the bulls need price to rebound 7.2% from the current $ 50,500 in order to cut losses in half.
With the $ 2 billion long liquidation on December 4th, the bulls may be trying to stay afloat and will not want to take any chances right now. It doesn’t work for bullish investors to waste their efforts to rescue this short-term loss.
In this case, the bears should have the upper hand until tomorrow’s weekly options expiration.
The cops suffered heavy losses
Here are the three most likely scenarios based on the current price trend. The number of call and put options contracts available on December 10th will vary depending on the Bitcoin price at expiration. An imbalance in favor of both represents a theoretical gain:
- From $ 47,000 to $ 50,000: 400 buy orders vs. 6,600 sell orders. The net result was $ 300 million in favor of put options (bears).
- From $ 50,000 to $ 54,000: 1,700 buy orders vs. 4,700 sell orders. The net result is $ 160 million in favor of put options (bears).
- Over $ 54,000: 2,400 buy orders vs. 2,900 sell orders. The net result favors the put option (amounts to) an additional 30 million US dollars.
This rough estimate takes into account calls used in bullish bets and puts only for neutral to bearish trades. However, this simplification does not imply more complex investment strategies.
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