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On December 14, Bitcoin (BTC) climbed above $18,000 for the first time in 34 days, up 16.5% from its November 21 low of $15,500. We have regained the vital 4,000 point support.
BTC’s price started off in a bull market, but investors were eagerly awaiting the Federal Reserve’s decision on interest rates and Fed Chairman Jerome Powell’s remarks. His subsequent rate hike of 0.50% and Powell’s explanation of why the Fed will continue with its current policy is that on Dec. 16 he will maintain current gains leading to a $370 million option expiration. gave investors good reason to doubt
Analysts and traders expect the macroeconomic tightening move to soften in some way. For those unfamiliar, the Federal Reserve has previously said that in February 2020 he was $4.16 trillion and in February 2022 he was a staggering $8.9 trillion. We expanded our balance sheet to scale.
Since that peak, monetary authorities have tried to cut debt instruments and exchange-traded funds (ETFs), a process called tapering. However, over the past five months, he has lost less than $360 billion in assets.
Until we have a clearer guide to the economic policies of the world’s largest economy, bitcoin traders are likely to remain skeptical of sustained price volatility regardless of direction.
Open interest for options expiring on December 16th is $370 million, but the real number is lower as the bears were caught off guard after a move to $18,000 on December 14th. $16,500, which is unlikely given market conditions.
The 0.94 call-to-put ratio represents a balance between $180 million of call (buy) open interest and $190 million of put (sell) options. Nonetheless, with Bitcoin near $18,000, most bearish bets will likely be worthless.
If Bitcoin remains above $18,000 on December 16th at 8am UTC, these put (sell) options will effectively become unavailable. This difference occurs because if BTC trades above that level at expiration, his right to sell Bitcoin for $17,000 or $18,000 becomes worthless.
Below are the four most likely scenarios based on the current price action. The number of Bitcoin option contracts available for call (bullish) and put (bearish) instruments on December 16 depends on the expiry price. An imbalance in favor of both sides constitutes a theoretical gain.
This rough estimate takes into account put options used in bearish bets and call options used in neutral to bullish trades only. Yet this oversimplification ignores more complex investment strategies.
For example, a trader can sell a put option, effectively gaining positive exposure to Bitcoin above a certain price, but unfortunately there is no easy way to estimate this effect.
During a bear market, the tone of the news flow and significant impact on the cryptocurrency market can easily negatively impact the price of Bitcoin.
Recent Negative Crypto News Involves Reports In U.S. Court Filings Showing An Unfair Trading Advantage Of Alameda Research, A Market-Making And Trading Firm Associated With Bankrupt Exchange FTX .
The U.S. Commodity Futures Trading Commission claims Alameda Research has faster trade execution times and is exempt from the exchange’s “automated clearing risk management process.”
The bulls’ best case scenario, which runs through December 16, would require a gain of over $19,000 to reach $155 million. This seems unlikely given the lingering restrictions and risk of contagion. For now, the bears are likely to be able to pressure BTC below $18,000 and avoid further losses.
The views, thoughts and opinions expressed herein are those of the author only and do not necessarily reflect or represent the views or opinions of Cointelegraph.
This article does not contain investment advice or recommendations. All investment and trading moves involve risk and readers should conduct their own research when making decisions.
