According to crypto analyst Marcel Pechman, Bitcoin bulls aim to make $235 million from the expiration of BTC options on July 22. However, the analyst states that a downside move below $22,000 is possible to disrupt this plan. We have prepared Marcel Pechman’s analysis for our readers.
Bitcoin briefly broke $24,000
cryptocoin.comAs you follow, Bitcoin (BTC) briefly rose above $24,000 on July 20. However, the resistance level proved to be tougher than expected. Then the excitement lasted less than two hours. On the positive side, $24,280 represents a 28.5% increase from the July 13 low of $18,900.
Bank of America released its latest fund managers survey on July 19. The headline is significant: “I’m a very bear, now I’m a bull”. The report points to investor pessimism, weak corporate earnings prospects and stock allocations at their lowest level since September 2008. The 4.6% rise in the tech-heavy Nasdaq Composite Index between July 18 and 20 provided hope for bulls to profit from the July 22 expiration of weekly options.
Meanwhile, Russian President Vladimir Putin has approved plans to restore the Nord Stream gas pipeline flow after the current maintenance period. After that, global macroeconomic tensions eased on 20 July. However, over the past few months, data shows that Germany has reduced its dependence on Russian gas from 55% to 35% of its demand.
The Bears placed their bets at $21,000 or less
The open interest for the July 22 options expiration is $540 million. But the real figure will be lower as bears are caught by surprise. These traders were not expecting a 23% rally from July 13 to July 20. Because his bets were targeting $22,000 and below.
The 1.09 call-put ratio represents the balance between the $280 million call (buy) open interest area and the $260 million put (sell) options. Currently, Bitcoin is hovering around $23,500. This means that most bear bets will likely become worthless.
If the price of Bitcoin stays above $22,000 on July 22 at 08:00 UTC, it will only be worth $30 million from the put (sell) options. This difference is due to the fact that the right to sell Bitcoin at $22,000 is useless if BTC trades above this level at maturity.
Bitcoin profit targets of bulls and bears
Below are the four most likely scenarios based on the current price action. The number of options contracts available for call (bull) and put (bear) instruments on July 22 varies depending on expiry prices. The imbalance in favor of both parties constitutes the theoretical profit:
- Between $20,000 and $21,000: 900 calls and 3,000 puts. The net result supports put (bear) instruments by $60 million.
- Between $21,000 and $22,000: 2,400 calls and 3,000 puts. The net result is balancing between bulls and bears.
- Between $22,000 and $24,000: 6,600 calls and 500 puts. The net result supports call (bull) instruments by $140 million.
- Between $24,000 and $26,000: 9,400 calls vs. 0 puts. The bulls take full control, making a profit of $235 million.
This rough estimate considers put options used in bear bets and call options only on neutral-bullish trades. Even so, this oversimplification ignores more complex investment strategies. For example, a trader could sell a put option by buying Bitcoin above a certain price. Unfortunately, there is no easy way to predict this effect.
The bears have until Friday to turn things around
Bitcoin bears need to push the price below $22,000 on July 22 to avoid a $140 million loss. On the other hand, the best-case scenario for the bulls requires slight pressure above $24,000 to maximize gains.
Bitcoin bears held $222 million in leveraged long positions that were liquidated from July 17 to July 20. Therefore, they need to have less margin to raise the price. In other words, the bulls are trying to keep BTC above $22,000 before the July 22 options expiration.
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