Bitcoin rebound falters amid SEC crackdown on exchanges, raising chance of a BTC price capitulation

June 8, 2023 Coin Telegraph

Regulatory concerns continue to impact the entire crypto market and this week’s BTC options expiry could play a decisive role in pushing Bitcoin price under $26,000.

Bitcoin (BTC) price lost steam after a failed retest of the $27,400 resistance on June 6, signaling that investors became less confident after the recent regulatory actions by the U.S Securities and Exchange Commission against Binance and Coinbase. Both exchanges are being sued on multiple counts, including failure to register as licensed brokers and offering unregistered securities.

The SEC might have a difficult case ahead

According to Blockchain Association CEO Kristin Smith, the SEC is trying to circumvent formal rulemaking processes and deny public engagement. Meanwhile, Insider Intelligence crypto analyst Will Paige said the SEC’s intent is to police the space through enforcement in the absence of a regulatory framework.

Those criticisms explain why investors may be clinging to their hopes in the U.S. Financial Services Committee hearing, scheduled for June 13.

The potential overreach of the SEC has caused ripples multiple times,including the U.S. legislative. Senator Bill Hagerty, for instance, stated that the regulating agency is "weaponizing their role", and publicly called out the SEC chairman Gary Gensler.

The @SECGov is weaponizing their role to kill an industry. Allowing a company to list publicly and then stonewalling their attempts to register is indefensible. @GaryGensler, expect to hear from Congress.https://t.co/GdprSW1Yns
— Senator Bill Hagerty (@SenatorHagerty) June 6, 2023

Further supporting the thesis that the cryptocurrency space can function without crypto-banks, as the centralized exchanges are commonly known, is the sudden increase in decentralized finance (DeFi) volumes.

The median trading volume across the top three decentralized exchanges jumped 444% between June 5 and June 7. As DEX volumes surged, net outflows on Binance reached $778 million, the difference between the value of assets entering and exiting the exchange.

Bitcoin has been trying to claim back the $27,000 support, but that might be harder than expected given the upcoming $670 million weekly option expiry on June 9.

Bulls have been caught by surprise with the negative newsflow

It is worth noting that the actual open interest for the June 9 expiry will be lower since bulls concentrated their wagers above $27,000. These traders got excessively optimistic after Bitcoin’s price gained 9% between May 25 and May 29, testing the $28,000 resistance.

*Bitcoin options aggregate open interest for June 9. Source: CoinGlass*

The 0.63 put-to-call ratio reflects the imbalance between the $410 million in call (buy) open interest and the $260 million in put (sell) options. However, if Bitcoin’s price remains near $26,500 at 8:00 am UTC on June 9, only $38 million worth of these call (buy) options will be available. This difference happens because the right to buy Bitcoin at $27,000 or $28,000 is useless if BTC trades below that level on expiry.

Bitcoin bears aim for sub-$26,000 to increase their payout

Below are the four most likely scenarios based on the current price action. The number of options contracts available on June 9 for call (bull) and put (bear) instruments varies depending on the expiry price.

The imbalance favoring each side constitutes the theoretical profit:

Between $25,000 and $26,000: 100 calls vs. 5,100 puts. Bears in total control, profiting $125 million.
Between $26,000 and $27,000: 1,500 calls vs. 3,900 puts. The net result favors the put (sell) instruments by $65 million.
Between $27,000 and $28,000: 4,200 calls vs. 1,300 puts. The net result favors the call (bull) instruments by $80 million.
Between $28,000 and $29,000: 8,700 calls vs. 700 puts. The net result favors call (bull) instruments by $225 million.

This crude estimate considers the put options used in bearish bets and the call options exclusively in neutral-to-bullish trades. This oversimplification disregards more complex investment strategies.

Given that Bitcoin longs using futures contracts were liquidated to the tune of $100 million on June 5, bulls might have less margin required to try pumping the BTC price above the $27,000 mark. Consequently, bears seem closer to scoring a decent profit on Friday's options expiry.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Bitcoin price capitulation below $26K increases as Friday’s BTC options expiry looms

May 17, 2023 Coin Telegraph

capitulation

This week’s BTC options expiry could play a decisive role in Bitcoin price potentially trading below the $26,000 level.

Bitcoin (BTC) price lost steam after a failed rupture of the $27,500 resistance on May 15, putting bears in a better position for the May 19 expiry. The regulatory newsflow likely played a key role in trimming investors’ risk appetite as governments seek more control over the sector.

In a memo circulated among committee members, Democrats in the United States legislature sought to cement the SEC’s authority over crypto. The document was made public on May 10, including the argument that nearly all digital assets constitute securities. Moreover, according to Gensler’s view, even network nodes are in violation of securities laws.

The United Kingdom’s Treasury Committee “strongly recommended” on May 17 regulating retail crypto trading and investment activity as gambling, consistent with the principle of “same risk, same regulatory outcome.” Treasury Committee Chair Harriett Baldwin described Bitcoin and Ether as accounting for two-thirds of the total market capitalization of crypto assets, both of which she claimed are “unbacked.”

The $735 million Bitcoin weekly options expiry on May 19 might play a decisive role in determining whether the price will capitulate by falling below $26,000.

Bitcoin could be making a short-term bottom

Bitcoin bears will try to take advantage of the negative regulatory environment, and uncertainty caused by the risk of the U.S. Treasury ‘running out of funds’ as the debt ceiling approaches. Such a pessimistic scenario partially explains why some Bitcoin traders decided to reduce exposure over the past couple of weeks.

*Bitcoin four-hour price movements during option expiries. Source: TradingView*

Bitcoin price traded down 6.6% in the 36 hours that preceded the latest BTC options expiry on May 12, marking a short-term bottom on the 4-hour chart. More importantly, the subsequent 3-day rally towards $27,500 was short-lived, favoring the thesis of bearish momentum.

Bitcoin options data shows bulls were excessively optimistic

The open interest for the May 19 options expiry is $735 million, but the actual figure will be lower since bulls concentrated their wagers above $28,000. These traders got excessively optimistic after Bitcoin’s price gained 7% between May 12 and May 15, testing the $27,500 resistance.

*Bitcoin options aggregate open interest for May 19. Source: CoinGlass*

The 0.42 call-to-put ratio reflects the imbalance between the $424 million in call (buy) open interest and the $312 million in put (sell) options. However, if Bitcoin’s price remains near $26,500 at 8:00 am UTC on May 19, only $30 million worth of these call (buy) options will be available. This difference happens because the right to buy Bitcoin at $27,000 or $28,000 is useless if BTC trades below that level on expiry.

Bitcoin bulls aim for $27,000 to balance the scales

Below are the four most likely scenarios based on the current price action. The number of options contracts available on May 19 for call (bull) and put (bear) instruments varies depending on the expiry price.

The imbalance favoring each side constitutes the theoretical profit:

Between $25,000 and $26,000: 100 calls vs. 7,800 puts. Bears in total control, profiting $190 million.
Between $26,000 and $27,000: 1,100 calls vs. 4,300 puts. The net result favors the put (sell) instruments by $80 million.
Between $27,000 and $28,000: 2,300 calls vs. 2,000 puts. The result is balanced between put and call options.
Between $28,000 and $29,000: 5,700 calls vs. 700 puts. The net result favors the call (bull) instruments by $140 million.

This crude estimate considers the put options used in bearish bets and the call options exclusively in neutral-to-bullish trades. Even so, this oversimplification disregards more complex investment strategies.

For instance, a trader could have sold a call option, effectively gaining negative exposure to Bitcoin above a specific price. Unfortunately, there’s no easy way to estimate this effect.

Still, traders should be cautious as the bears are currently in a better position for Friday’s weekly options expiry, favoring negative price moves. Thus, an eventual capitulation below $26,000 should not be discarded.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

This Bitcoin options strategy allows early bird traders to prepare for BTC’s next breakout

May 15, 2023 Coin Telegraph

Coin Telegraph

Crypto traders expecting a price reversal could use this options strategy to get positioned in Bitcoin.

Bitcoin’s price broke below its 55-day resistance at $27,000 on May 12, down 12.3% in 30 days. But more importantly, it decoupled from the S&P 500 Index, which is basically flat from 30 days ago and 15% below its all-time high.

*Bitcoin price in USD (right) vs. S&P 500 futures (left), 12-hour. Source: TradingView*

As the chart indicates, for some reason, Bitcoin (BTC) investors believe that the favorable macroeconomic trends for risk markets were overshadowed by the increasing risk perception of the cryptocurrency sector.

Financial crisis could fuel Bitcoin’s price increase

For starters, there’s the impending United States government debt ceiling crisis, which, according to U.S. Treasury Secretary Janet Yellen, could cause an “economic and financial catastrophe." The increased risk of default should, in theory, be beneficial for scarce assets, as investors seek shelter from a weaker U.S. dollar.

The $5.6 trillion commercial real estate market in the U.S. is subject to additional risks due to high interest rates and troubled regional banks. Guggenheim Partners chief investment officer Anne Walsh stated, “We’re likely going into a real estate recession, but not across the entire real estate market."

There is also positive news on the cryptocurrency regulatory front, as the industry gathers additional support against the regulatory efforts of the U.S. Securities and Exchange Commission (SEC). The U.S. Chamber of Commerce filed an amicus brief on May 9, defending the Coinbase exchange and accusing the SEC of deliberately creating a precarious and uncertain landscape.

Further fueling investors’ hope is the Bitcoin halving expected for April–May 2024, when the miners’ incentive per block will be reduced from 6.25 BTC to 3.125 BTC. Addresses holding 1 BTC or more reached one million on May 13, according to the Glassnode analytics firm. In total, a whopping 190,000 “whole-coiners” have been added since February 2022.

Despite the recent Bitcoin price weakness, there are enough drivers and potential triggers to sustain a considerable bull run in the upcoming months. Professional traders are aware of the liquidation risks associated with futures contracts, so their preferred investment strategies include options instruments.

How to apply the risk reversal strategy in Bitcoin

Options trading presents opportunities for investors to profit from increased volatility or obtain protection from sharp price drops, and these complex investment strategies, involving more than one instrument, are known as “option structures."

Traders can use the “risk reversal” option strategy to hedge losses from unexpected price swings. The investor benefits from being long on the call option but pays for those by selling the put. Basically, this setup eliminates the risk of the stock trading sideways and comes with limited risk if the asset trades down.

*Profit and loss estimate. Source: Deribit Position Builder*

The above trade focuses exclusively on June 30 options, but investors will find similar patterns using different maturities. Bitcoin was trading at $27,438 when the pricing took place.

First, the trader needs to buy protection from a downside move by buying 2.3 BTC puts (sell) $22,000 options contracts. Then, the trader will sell 2.0 BTC put (sell) $25,000 options contracts to net the returns above this level. Finally, the trader should buy 3.2 call (buy) $34,000 options contracts for positive price exposure.

Investors are protected down to $25,000

That options structure results in neither a gain nor a loss between $25,000 (down 9%) and $34,000 (up 24%). Thus, the investor is betting that Bitcoin’s price on June 30 at 8:00 am UTC will be above that range while gaining access to unlimited profits and a maximum 0.275 BTC negative return.

If the Bitcoin price rallies toward $37,250 (up 36%), this investment results in a 0.275 BTC gain. Moreover, after a 42% rally to $39,000 within 45 days, net returns are 0.41 BTC. In essence, unlimited gains with a capped loss.

Even though there is no initial cost associated with this options structure, the exchange will require a 0.275 BTC margin deposit to cover the negative exposure.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Bitcoin bears need BTC price to go below $27K ahead of Friday’s $900M options expiry

May 11, 2023 Coin Telegraph

<div>Bitcoin bears need BTC price to go below K ahead of Friday's 0M options expiry</div>

Analysis

Bitcoin price giving up ground over the past week to slide below $28,000 has put bears in a better position for Friday's expiry.

The $900 million Bitcoin (BTC) weekly options expiry on May 12 might play a decisive role in determining whether the price will succumb below $27,000.

Bitcoin price rejected again at $30,000

BTC bears will try to take advantage of macroeconomic headwinds, Silk Road coins' FUD, and uncertainty caused by Bitcoin’s transaction fee spike to pull Bitcoin's price down in the next few days.

*Bitcoin 4-h price movements during option expiries. Source: TradingView*

The BTC/USD pair broke above $29,800 on May 6, but the tide quickly changed as the resistance proved stronger than anticipated.

The subsequent 8.2% two-day correction tested $27,400 support, favoring the thesis of sideways trading as investors evaluate the economic crisis dynamic and its potential impact on cryptocurrencies.

Meanwhile, Berkshire Hathaway owner and billionaire investor Warren Buffett is no longer optimistic about the U.S. economy’s growth. Such a pessimistic scenario for the global economy might explain why some Bitcoin traders decided to reduce exposure over the past week, greatly reducing the odds of breaking $30,000.

Bitcoin options: bulls were excessively optimistic

The open interest for the May 12 options expiry is $900 million, but the actual figure will be lower since bears were expecting sub-$28,000 price levels.

These traders got excessively optimistic after Bitcoin’s price rallied 11.2% between April 9 and April 14, testing the $31,000 resistance.

*Bitcoin options aggregate open interest for May 12. Source: CoinGlass*

The 1.65 call-to-put ratio reflects the imbalance between the $560 million in call (buy) open interest and the $340 million in put (sell) options.

But if Bitcoin’s price remains near $27,500 at 8:00 am UTC on May 12, only $11 million worth of these call (buy) options will be available. This difference happens because the right to buy Bitcoin at $28,000 or $29,000 is useless if BTC trades below that level on expiry.

Bitcoin bulls aim for $28,000 to balance the scales

Below are the four most likely scenarios based on the current price action. The number of options contracts available on May 12 for call (bull) and put (bear) instruments varies, depending on the expiry price.

The imbalance favoring each side constitutes the theoretical profit:

Between $25,000 and $27,000: 100 calls vs. 9,900 puts. Bears in total control, profiting $230 million.
Between $27,000 and $28,000: 400 calls vs. 5,000 puts. The net result favors the put (sell) instruments by $120 million.
Between $28,000 and $29,000: 1,500 calls vs. 2,100 puts. The result is balanced between put and call options.
Between $29,000 and $30,000: 3,300 calls vs. 800 puts. The net result favors the call (bull) instruments by $70 million.

This crude estimate considers the call options used in bullish bets and the put options exclusively in neutral-to-bearish trades. Even so, this oversimplification disregards more complex investment strategies.

For instance, a trader could have sold a put option, effectively gaining positive exposure to Bitcoin above a specific price. Unfortunately, there’s no easy way to estimate this effect.

Ultimately, after it became clear that the Bitcoin network was working as designed, the selling pressure dissipated, causing Bitcoin’s price to stabilize around $27,500. Nevertheless, traders should be cautious as the bears are still in a better position for Friday’s weekly options expiry, favoring negative price moves.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Bitcoin options: How to play it when BTC price moves up or down 10%

May 8, 2023 Coin Telegraph

bank

A perfect storm is forming for higher volatility. Learn how to profit from BTC price moves on either side.

Here’s how Bitcoin (BTC) traders can profit whether its price move up or down 10% within 55 days.

Bitcoin options: Bracing for volatility

Traditional market analysts have started calling for a volatility spike due to the United States government debt discussion.

Moreover, signs of stress coming from the banking sector surprised investors after the U.S. Dollar Index (DXY), which measures the U.S. dollar against a basket of foreign currencies, reached its lowest level in 12 months at 101 on May 4.

Stock market and macro analyst Markets & Mayhem posted a chart from Deutsche Bank that correlates historical government spending and debt concerns with spikes in the stock market volatility.

Volatility could rise into a government debt debacle as the kabuki theater carries on

Source: Deutsche pic.twitter.com/fmJVKvUZvc
— Markets & Mayhem (@Mayhem4Markets) May 1, 2023

U.S. Treasury Secretary Janet Yellen has warned that the government may run out of cash by June if Congress fails to raise the debt ceiling. According to the BBC, President Joe Biden has called a meeting of congressional leaders on the issue for May 9.

Government officials said the overspending is partly due to lower-than-expected income tax receipts, which are typical of recession periods.

Volatility could impact Bitcoin price, but direction unknown

It is worth noting that the volatility indicator neither dictates whether the market has been gaining strength nor anticipates eventual crashes.

The index calculation does not account for price gains or losses, only directional changes. Thus, if the volatility reaches historically low levels, it merely reflects that the asset has displayed a low amplitude of daily price fluctuations.

*Bitcoin 40-day realized volatility. Source: TradingView*

Notice how Bitcoin’s 40-day historical volatility does not usually remain below 40% for long. That information, coupled with the traditional markets’ stress caused by the regional banking crisis and the debt ceiling discussion might be brewing the perfect storm for a sharp volatility spike.

While one can benefit from the expectation of higher volatility for the next couple of weeks, most investors are unwilling to take directional bets, meaning they have no confidence in whether the market will move up or down.

However, there is an options strategy that fits this scenario and allows investors to profit from a strong move on either side.

The reverse (short) iron butterfly is a limited-risk, limited-profit options trading strategy. It’s important to remember that options have a set expiration date, meaning the price change must happen during the defined period.

*Profit/Loss estimate. Source: Deribit Position Builder*

The option prices above were taken on May 5, with Bitcoin trading at $29,172. All options listed are for the June 30 expiry, but this strategy can also be used using a different time frame.

The suggested non-directional strategy consists of selling 9.2 BTC contracts of the $26,000 put options while simultaneously selling 12.2 call options with a $33,000 strike. To finalize the trade, one should buy 13.5 contracts of $30,000 call options and another 8 contracts of $30,000 put options.

While this call option gives the buyer the right to acquire an asset, the contract seller gets a (potential) negative exposure. To fully protect from market oscillations, one must deposit 0.90 BTC (roughly $26,250), representing the investors’ maximum loss.

Conviction is essential, as the risk-reward ratio is reversed

For this investor to profit, one needs Bitcoin’s price to be below $27,000 on June 30 (down 7.5%) or above $32,150 (up 10.2%). In essence, the trade has a hugely profitable area, but loses over twice the potential gain if Bitcoin fails to move either way considerably.

The maximum payout is 0.337 BTC (roughly $9,830), but if a trader is confident that volatility is right around the corner, a 10% move in 55 days seems quite feasible.

Notice that the investor can revert the operation before the options expiry, preferably right after a strong Bitcoin price move. All one needs to do is buy back the two options that have been sold and sell the other two that were previously bought.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Got liquidated with Bitcoin futures? Get 3.5x leverage using this options strategy

April 27, 2023 Coin Telegraph

Banking Crisis

Here is how professional traders use Iron Condor options strategies to benefit from the banking crisis and the U.S. debt ceiling increase.

Bitcoin (BTC) bulls might be disappointed after the $31,000 resistance proved stronger than expected on April 14. However, looking at a broader time frame, Bitcoin has been the best-performing asset in 2023, gaining over 74% year-to-date at $29,000.

Positioning for weaker dollar, debt ceiling

It is worth noting that gold is merely 4% behind its all-time high, likely indicating a weaker U.S. dollar as investors increase the odds of recession and further fiscal turmoil for the world’s biggest economy.

Behind the bullish price momentum for Bitcoin are the weakness in the U.S. financial system, namely the $100 billion in quarterly net withdrawals at First Republic Bank and the legislative effort to approve an increase to the urgent $31.6 billion national debt ceiling.

For Bitcoin investors, a financial crisis is a net positive as it forces the U.S. Federal Reserve to expand its emergency funding programs and take out additional unprofitable long-term debt from the system.

Cryptocurrency traders are uncomfortable with the regulatory environment, and the April 25 statement from the New York Federal Reserve further added to the uncertainty. The guidelines disclosed could potentially hinder the USD Coin (USDC) stablecoin issuer Circle’s access to the Fed’s securities reverse-repurchase program, the safest vehicle to get yield on deposits.

Unfortunately, there is no way to predict how the banking crisis will unfold or the timeline for regulatory actions against exchanges and stablecoin issuers. On the other hand, "easy money" policies are well known to every investor as extremely beneficial for scarce assets.

Such a scenario explains why professional traders have been using the bullish Iron Condor strategy to maximize gains if Bitcoin breaks above $32,000 in May with limited risk.

Call and put Bitcoin options to hedge the bet

Buying Bitcoin futures pays off during bull markets, but the issue lies in dealing with liquidations when BTC price goes down. This is why pro traders use options strategies to maximize their gains and limit their losses.

The skewed Iron Condor strategy can yield profits above $31,400 by the end of May while limiting losses if the expiry price is below $31,000. It is worth noting that Bitcoin traded at $29,730 when the pricing for this model took place.

*Bitcoin options Iron Condor strategy returns. Source: Deribit Position Builder*

The call option gives its holder the right to acquire an asset at a fixed price in the future. For this privilege, the buyer pays an upfront fee known as a premium.

Meanwhile, the put option allows its holder to sell an asset at a fixed price in the future, which is a downside protection strategy. On the other hand, selling this instrument (put) offers exposure to the price upside.

The Iron Condor consists of selling the call and put options at the same expiry price and date. The above example has been set using the May 26 contracts, but it can be adapted for other timeframes.

Modest 6% Bitcoin price gain needed for profits

As depicted above, the target profit area is $31,420 (6% above the current $29,730 price) to $36,000 (21.2% above the current price). To initiate the trade, the investor needs to short (sell) 1.5 contracts of the $33,000 call option and 3 contracts of the $33,000 put option. Then, the buyer must repeat the procedure for the $35,000 options, using the same expiry month.

Buying 4.8 contracts of the $31,000 put option to protect from an eventual downside is also required. Lastly, one needs to purchase 7.8 contracts of the $36,000 call option to limit losses above the level.

This strategy’s net profits peak at 0.225 BTC ($6,685 at current prices) between $33,000 and $36,000, but they remain above 0.063 BTC ($1,750 at current prices) if Bitcoin trades in the $31,850 and $35,700 range.

The investment required to open this skewed Iron Condor strategy is the maximum loss — 0.063 BTC or $1,750 — which will occur if Bitcoin trades below $31,000 on May 26.

The benefit of this trade is that a wide target area is covered while providing a 357% return versus the potential loss. In essence, it provides a leverage opportunity without the liquidation risks typical from futures contracts.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Bitcoin touches $30K as BTC bulls well-positioned for weekly $3.2 billion options expiry

April 26, 2023 Coin Telegraph

Bitcoin

Weaker U.S. financial system has raised BTC bulls’ odds of profiting $780 million on April 28 options expiry.

Bitcoin (BTC) price broke above $29,800 on April 26, totaling 9.6% gains in 24 hours, reaching as high as $30,024 on Bitstamp. Some commentators argue that the 50% drop in First Republic Bank (FRB) shares on April 25 has been the catalyst for Bitcoin’s rally.

Bitcoin gains from banking crisis

Despite the positive shift, its price remains 22.5% down in twelve months, which explains why bulls are far from optimistic.

The FRB debacle comes after the bank’s earnings report, which showed that clients’ deposits shrank by 40.8% during the quarter as customers pulled out their money. Notably, the bank received a $30 billion cash injection in March, but the quarterly outflows topped $100 billion.

On the other hand, the U.S. Federal Reserve signaled that it would hike interest rates above 5%. By increasing the cost of capital, the central bank might succeed in taming inflation, but the unintended consequence is a weaker economy and a bearish market structure for risk assets, including Bitcoin.

Some analysts pin the $31,000 resistance rejection to the harsh cryptocurrency regulatory environment, especially in the U.S.— which became more evident after Coinbase filed a court action to force the Securities and Exchange Commission (SEC) to clarify industries’ rules.

More specifically, the exchange asked the SEC to provide clarification about how it goes about classifying tokens as securities.

Still, Bitcoin’s gains of 27% between March 26 and April 26 is exactly what bulls needed to succeed in April’s $3.2 billion monthly options expiry.

Bitcoin options: bears placed 94% of bets under $28,000

The open interest for the April 28 options expiry is $3.2 billion, but the actual figure will be lower since bears were expecting sub-$28,000 price levels. These traders were caught by surprise as Bitcoin gained 9.6% between April 25 and April 26.

*Bitcoin options aggregate open interest for April 28. Source: CoinGlass*

The 1.19 call-to-put ratio reflects the imbalance between the $1.7 billion call (buy) open interest and the $1.5 billion put (sell) options.

However, if Bitcoin's price remains near $29,500 at 8:00 am UTC on April 28, only $54 million worth of these put (sell) options will be available. This difference happens because the right to sell Bitcoin at $28,000 or $29,000 is useless if BTC trades above that level on expiry.

Bulls aim for $30,000 to secure a $780 million profit

Below are the four most likely scenarios based on the current price action. The number of options contracts available on April 28 for call (bull) and put (bear) instruments varies, depending on the expiry price. The imbalance favoring each side constitutes the theoretical profit:

Between $27,000 and $28,000: 14,300 calls vs. 8,700 puts. The net result favors the call (bull) instruments by $150 million.
Between $28,000 and $29,000: 19,000 calls vs. 3,200 puts. Bulls increase their advantage to $445 million.
Between $29,000 and $30,000: 21,700 calls vs. 1,900 puts. Bulls increase their advantage to $575 million.
Between $30,000 and $31,000: 26,500 calls vs. 600 puts. The net result favors the call (bull) instruments by $780 million.

For example, a trader could have sold a call option, effectively gaining negative exposure to Bitcoin above a specific price. Unfortunately, there's no easy way to estimate this effect.

BTC bears mass-liquidated in leverage shorts

Bitcoin bulls will likely be satisfied with $575 million profits if they fail to break the $30,000 resistance. Meanwhile, bears need a 6.5% price drop from $29,800 to reduce their losses to $150 million. However, leverage bets on the price downside using futures contracts recently saw $166 million in forced liquidations—leaving less room for bears to maneuver.

Given the bullish momentum that the First Republic Bank issues have generated, Bitcoin bulls are in a good position for the April $3.2 billion BTC monthly options expiry.

Most likely, those profits will be used to further strengthen the $28,000 support with the BTC price now well above $29,000, so the expected outcome is especially concerning for bears.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Fed signals a sharp rate hike in March due to inflation — Here’s how Bitcoin traders can prepare

March 8, 2023 Coin Telegraph

Coin Telegraph

The U.S. Federal Reserve is set to roll out a fresh interest rate hike on March 22, and options traders could use this risk-averse strategy to generate profits.

Like it or not, for crypto investors, the U.S. Federal Reserve policy on interest rate hikes and high inflation is the single most relevant measure for gauging demand for risk assets. By increasing the cost of capital, the Fed boosts the profitability of fixed-income instruments, but this is detrimental to the stock market, real estate, commodities and cryptocurrencies.

One positive aspect of the Fed's meetings is that they are scheduled well in advance, so Bitcoin (BTC) traders can prepare for those. Federal Reserve policy decisions historically cause extreme intraday volatility in risk assets, but traders can use derivatives instruments to yield optimal results as the Fed adjusts interest rates.

Another challenge for traders is they face pressure from Bitcoin being highly correlated to equities. For example, the 50-day correlation coefficient versus the S&P 500 futures has been running above 70% since Feb. 7. Although it does not state cause and consequence, it is evident that cryptocurrency investors are waiting for the direction of traditional markets.

It's also possible that Bitcoin's low emissions could prove to be a benefit as investors realize that the FED is running out of options to curb inflation. By raising interest rates even further, it could cause the U.S. government's debt repayments to spiral out of control and eventually surpass $1 trillion annually. This creates a huge incentive for Bitcoin bulls, but extreme caution is needed by those willing to make trades based on interest rate hikes.

Risk takers could benefit from buying Bitcoin futures contracts to leverage their positions, but they could also be liquidated if a sudden negative price move occurs ahead of the FED's decision on March 22. For this reason, pro traders are more likely to opt for options trading strategies such as the skewed iron condor.

A balanced risk approach to using call options

By trading multiple call (buy) options for the same expiry date, traders can achieve gains 3 times higher than the potential loss. This options strategy allows a trader to profit from the upside while limiting losses.

It is important to remember that all options have a set expiry date, so Bitcoin's price increase must happen during the set period.

Listed below are the expected returns using Bitcoin options for the March 31 expiry, but this methodology can also be applied to different time frames. While the costs will vary, the general efficiency will not be affected.

The call option gives the buyer the right to acquire an asset, but the contract seller receives (potential) negative exposure. The iron condor consists of selling the call and put options at the same expiry price and date.

As shown above, the target profit area is above $23,800, and the worst scenario is a 0.217 BTC (or $5,156 at current prices) if the expiry price on March 31 happens below $23,000.

To initiate the trade, the investor must buy 6.2 contracts of the $23,000 put (sell) option. Then, the buyer must sell 2.1 contracts of the $25,000 call option and another 2.2 contracts of the $27,000 call option. Next, the investor should sell 3.5 contracts of the $25,000 put (sell) option combined with 2 contracts of the $27,000 put option.

As a final step, the trader must purchase 3.9 contracts of the $29,000 call option to limit losses above the level.

This strategy yields a gain if Bitcoin trades between $23,800 and $29,000 on March 31. Net profits peak at 0.276 BTC ($6,558 at current prices) between $25,000 and $27,000, but remain above 0.135 BTC ($3,297 at current prices) if Bitcoin trades in the $24,400 and $27,950 range.

The investment required to open this skewed iron condor strategy is the maximum loss, hence 0.217 BTC or $5,156, which will happen if Bitcoin trades below $23,000 on March 31. The benefit of this strategy is the wide profit target area, yielding a better risk-to-reward outcome than leveraged futures trading, especially considering the limited downside.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

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