The closer the expiration date approaches, the less likely it is that traders will be willing to pay $47,000 for the right to sell BTC. The same goes for ultra fast call options of $60,000 or more. So the total open interest of $6.1 billion is largely inflated by worthless options.
Could it be that something hidden in BTC options is causing the current price pressure? To determine this, you need to analyze how these calls and put the pile under $50,000.
26. Cumulative open interest of March BTC on strike. Source: Bybt.com.
Total open interest has increased slightly over the last ten days to 105,000 BTC options. Now that the price of BTC has dropped to $51,500, it is worth $5.4 billion. As previously stated, this review is not fair if you exclude cash-neutral bets under $45,000, which are effectively worthless at this point. These figures mean that only 11,100 BTC contracts remain.
This figure represents only $572 million of open puts, or 20% at expiration. Price-neutral or full-price calls targeting the $20,000 to $56,000 range yield 20,850 BTC, or $1.07 billion at current BTC prices. That number is nearly double competing puts and gives the bulls full control ahead of Friday’s expiration.
Will the reduction to $45,000 reverse the trend?
If the price of bitcoin reaches $45,000 on March 26. at 8:00 UTC, these puts at 11,100 will provide further downward pressure. On the other hand, this would be nearly offset by 11,050 neutral to bullish calls from $20,000 to $44,000. The number of call options actually exercised will correspond to the number of put options without any imbalance.
So when the media or analysts point out that $45,000 is a game changer for short sellers to take control of options expiration, they are wrong on this point. Undoubtedly, some of these calls can be used in a variety of strategies, giving the owner a market-neutral position.
Similarly, those who adhere to the neutral version of put can argue. Not necessarily because its buyers support bitcoin’s price decline, but rather because holders also buy futures or sell puts with a slightly higher strike price.
What could be the cause of the current drop in the price of bitcoin?
The human mind needs stories, but that’s not always how the market works. Last week there were at least three more events of Fear, Uncertainty and Doubt (FUD).
Among the most notable are Ray Dalio: the high probability of a bitcoin ban in the US and comments from Vincent Mortier, deputy chief investment officer at Amundi, who suggested that regulation of cryptocurrencies could cause a sharp price correction.
Another supposedly bearish statement was made on the 22nd. March, when Federal Reserve Chairman Jerome Powell said bitcoin is too volatile to be currency and is not backed by anything.
These explanations generally play a role in dampening investors’ expectations, but no one can know what drives different market participants to trade at each price level.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Cointelegraph. Every investment and every stage of trading involves risk. You should do your own research before making a decision.
frequently asked questions
Why has the price of bitcoins dropped so much?
1. Funding Stress. … So there was always the risk of a funding reset. According to data source Coinalyze, the price drop has so far eliminated more than $300 million in bitcoin longs – about 30 percent of the total $1.33 billion in liquid longs in the crypto market.
What is the lowest price of Bitcoin?
Bitcoin takes parity with the US dollar. The price rose from $150 in October to $200 in November, reaching $200 on the 29th. November 2013 $1,242. The lowest price since the financial crisis of 2012/2013 was recorded on the 11th. April at 3:25 pm. The price passed the November 2013 high of $1,242 and then traded above $1,290.
What price will bitcoin reach in 2020?
Bloomberg Research 2020 Bitcoin Report Bloomberg Research recently released a new report on the future of bitcoin as an investment. According to a major media center and financial terminal, bitcoin is expected to reach $12,000 and $20,000 by the end of 2020.
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