Sun, August 14, 2022

Bitcoin Drives to $40K – Are Bulls Strong Enough?

Bitcoin Returns to $36K - the End of a Tense Week

The price of Bitcoin has been falling in the last two months. During this time, It tested $37,600 in multi-instance support. Added to this “falling” price action, BTC fell 16% daily, according to Russell’s 2000 rate.

The real driving force behind the current price of Bitcoin is investors’ concern about deteriorating macroeconomic conditions. Professional investors are concerned about the impact of the tightened economic policy of the US Federal Reserve. On May 3, billionaire hedge fund manager Paul Tudor Jones said the environment for investors is worse than ever. Monetary authority raises interest rates when financial conditions worsen.

On May 4, it was reported that the European Union had imposed new sanctions to phase out Russian crude oil imports in six months. The president of the European Commission said that this would be a complete ban on the import of Russian oil, sea, and pipeline.

For these reasons, traders are increasingly concerned about the potential impact of the global macroeconomic crisis on cryptocurrency markets. If the global economy goes into recession, investors seek protection by moving away from risky asset classes such as Bitcoin.

Bitcoin and Bulls

The open interest on May 6 options on Bitcoin is $735 million. However, the actual rate will be lower. BTC moved below $40,000. The 1.22 call ratio reflects the open interest of the $405 million calls on the $330 million selling options. Still, because Bitcoin is close to $39,000, 89% of growth bets are likely to become useless.

Meanwhile, if the price of Bitcoin stays below $39,000 on May 6, the bears will have these $100 million selling options. This difference is because the right to sell Bitcoin for $36,000 is not exercised if it trades above this level on time.

Below are the four most likely scenarios based on current price action. The number of option contracts available on May 6 for call and sale instruments varies with the expiration price. The imbalance that contributes to each side is a theoretical gain: $37,000 to $39,000: The net result is $145 million in favor of bears. $39,000 to $40,000: Bears have a $50 million advantage. From $40,000 to $41,000: Net result favors bulls with $105 million. From $41,000 to $42,000: Bulls increase their profits to $190 million.

Conclusion

This rough estimate provides call options used for growth bets and pot options exclusively in neutral-down trades. Nevertheless, this over-simplification neglects more complex investment strategies. For example, a trader could sell a call option to get the negative impact of Bitcoin above a particular price; However, unfortunately, there is no easy way to assess this effect.

Bitcoin bears should keep the price below $39,000 on May 6 to secure $145 million in profits. On the other hand, the Bulls can avoid losses by raising their BTC above $40,000. That’s enough to make $100 million. Given the macroeconomic conditions of the fall, the bears have a better position for the May 6 deadline.

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