The hacker who exploited the Deribit exchange’s hot wallet has started moving the stolen funds using the sanctioned cryptocurrency mixer Tornado Cash.
According to data from Etherscan, the attacker has sent a total of 1,610 ETH since the exploit amounting to a sum of $2.54 million per the current price of Ethereum pegged at $1,577.84, according to data from CoinMarketCap.
Blockchain security outfit PeckShield was the first to spot the transfers being done as of Saturday with a total of $350,000 moved at the time. According to the Etherscan data, the balance on the hacker’s address is pegged at 7,501.37 ETH, with substantially more funds to launder.
Attempts to trace the funds have now been complicated by the involvement of Tornado Cash. The crypto mixing protocol receives funds, splits them into several units, and cryptographically sends them to unrelated addresses in a manner where the source of the funds can be obfuscated.
The role Tornado Cash plays in the laundering of stolen funds such as this accounts for why the United States Treasury Department’s Office of Foreign Assets Control (OFAC) has banned the protocol. The regulator alleged that about $7 billion have been processed through the protocol thus far with a significant sum linked to the cybercrime syndicate Lazarus Group from North Korea.
Despite the protests from the crypto industry, the ban on Tornado Cash has been upheld, however, it has not stopped the Deribit exploiter from taking advantage of the shield it provides.
Since Blockchain.News reported the exchange’s $28 million exploit earlier this month, the protocol has taken several initiatives beyond the halting of transactions. The exchange said it has routed its transactions to Foreblocks for its robust security services, advising its users to open new Bitcoin (BTC) and supported altcoin addresses on Fireblocks to continually access its products and services.
Deribit Exchange has announced that it suffered an exploit on its hot wallet in the late hours of Tuesday, putting the trading platform amongst the list of crypto projects that have suffered a similar fate this year.
Taking to its official Twitter account, to announce the sad event, the exchange said though the quoted loss is true, that its users will not be affected as it will cover up the loss from its deep reserve.
“Deribit hot wallet compromised, but client funds are safe and loss is covered by company reserves. Our hot wallet was hacked for USD 28m earlier this evening just before midnight UTC on 1 November 2022,” the exchange’s tweet reads.
Deribit said besides the hot wallet, no other of its controlled wallets with Fireblocks or other cold storage was impacted. It noted that it has made it a matter of policy to safeguard 99% of its user’s funds in cold storage to reduce the potential impacts of these events.
Deribit is one of the biggest players in the Derivatives world, currently ranked in the 8th position according to data from CoinMarketCap. The exchange said in a bid to perfect its security systems, it had to pause major activities on its platform including withdrawals on its “third-party custodians Copper Clearloop and Cobo until we are confident all is safe to re-open.”
The exchange detailed that it has increased the number of confirmations necessary for deposits and that already initiated deposits will be credited to all user’s accounts after the required number of confirmations.
Exchanges have been a very fertile ground for hackers this year who extend their disturbing activities beyond centralized trading platforms to their Decentralized counterparts. From the hack of Crypto.com to that of Nomad Protocol, the trend has become a menace, calling for a security-focused solution to end this current onslaught across the board
Bitcoin (BTC) bulls have good reason to celebrate the 22% gain in the past week. The price is pushing toward $46,000 and to the surprise of many, the $43,000 level held steady despite the volatility caused by the United States inflation data released on Feb.10.
There have been mixed feelings on the macroeconomic side. For example, retail sales in the Eurozone disappointed on Feb. 4 when the figure showed a 2.0% year-on-year growth versus the 5.1% expectation. while the United States nonfarm payroll abruptly showed a 467,000 jobs increase.
Investors are clearly increasingly concerned about corporate earnings despite the stronger than expected China and U.S. economic growth. In the past few weeks some big names took a hit, including Meta (FB), Delivery Hero (DHER-DE), and Paypal (PYPL).
Today’s 7.5% yearly U.S. consumer price index growth will likely reinforce the Federal Reserve’s expectations of at least two interest rate hikes throughout 2022 and not many investors can seek protection in treasuries because the 5-year Treasury yield currently stands at 1.9%.
Bitcoin is still a risky asset, but its price is discounted
Considering that the S&P 500 is only 5% shy of its all-time high, Bitcoin’s recent strength should not come as a surprise. Curiously, put (sell) option instruments dominate the Feb. 11 options expiry, but bears were caught by surprise after Bitcoin price stabilized above $43,000 this week.
Bitcoin options aggregate open interest for Feb. 11. Source: CoinGlass
A broader view using the call-to-put ratio shows a 14% advantage to Bitcoin bears because the $400 million call (buy) instruments have a smaller open interest versus the $460 million put (sell) options. However, the 0.86 call-to-put indicator is deceptive because most bearish bets will become worthless.
For example, if Bitcoin’s price remains above $44,000 at 8:00 am UTC on Feb. 11, only $55 million worth of those put (sell) options will be available. That effect happens because there is no value in the right to sell Bitcoin at $40,000 if it’s trading above that level.
Bulls are aiming for a $300 million profit
Below are the three most likely scenarios based on the current price action. The number of options contracts available on Feb. 11 for bulls (call) and bear (put) instruments varies depending on the expiry price. The imbalance favoring each side constitutes the theoretical profit:
Between $42,000 and $44,000: 4,550 calls vs. 1,750 puts. The net result is $120 million favoring the call (bull) instruments.
Between $44,000 and $46,000: 6,380 calls vs. 860 puts. The net result favors bulls by $250 million.
Between $46,000 and $48,000: 7,860 calls vs. 50 puts. The net result favors the call (bull) instruments by $350 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 call option, effectively gaining a negative exposure to Bitcoin above a specific price. But unfortunately, there’s no easy way to estimate this effect.
Bitcoin bulls need a small pump above $46,000 to score a $350 million profit on Feb. 11. On the other hand, bears’ best case scenario requires a 4% price drop from the current $45,600 to reduce their loss to $120 million.
Bitcoin bears currently have no reason to add short positions, considering the recent weak corporate data numbers. Therefore, bulls should continue to display strength by pushing the price to $46,000 or higher during Friday’s options expiry.
A $350 million profit might be just what’s needed for bulls to regain confidence and re-open long leverage futures, causing further upward pressure.
The views and opinions expressed here are solely those of theauthorand do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.
Ether price (ETH) spent the last two months stuck in a rut and even the most bullish trader will admit that the possibility of trading above $4,400 in the next couple of months is dim.
Of course, cryptocurrency traders are notoriously optimistic and it is not unusual for them to expect another $4,870 all-time high, but this seems like an unrealistic outcome.
Despite the current bearish trend, there are still reasons to be moderately bullish for the next couple of months and using a “long condor with call options” strategy might yield a positive outcome.
Options strategies allows the investor to set upside limits
Options markets provide more flexibility to develop custom strategies and there are two instruments available. The call option gives the buyer upside price protection, and the protective put option does the opposite. Traders can also sell the derivatives to create unlimited negative exposure, similar to a futures contract.
Ether options strategy returns. Source: Deribit Position Builder
This long condor strategy has been set for the March 25 expiry and uses a slightly bullish range. The same structure can also be applied for bearish expectations, but this scenario assumes that most traders are looking for upside.
Ether was trading at $2,677 when the pricing took place, but a similar result can be achieved starting from any price level.
The first trade requires buying 5.14 ETH worth of $3,000 call options to create a positive exposure above this price level. Then, to limit gains above $3,500 the trader needs to sell 4.4 ETH contracts of the $3,500 call.
To complete the strategy, the trader needs to sell 6.65 ETH contracts of the $4,000 call, limiting the gains above such a price level. Lastly, a $4,500 upside protection call for 5.91 ETH is needed to limit the losses if Ether unexpectedly skyrockets.
The strategy aims for a healthy 3.2 to 1 profit to loss ratio
The strategy might sound complicated to execute, but the margin required is only 0.175 ETH, which is also the max loss. The potential net profit happens if Ether trades between $3,100 (up 15%) and $4,370 (up 63%).
Traders should remember that it is also possible to close the position ahead of the March 25 expiry. In this strategy, the maximum gain occurs between $3,500 and $4,000 at 0.56 Ether, which is more than three times higher than the potential loss.
Unlike futures trading, this strategy gives the holder peace of mind because there is no liquidation risk. It is also worth noting that most derivatives exchanges accept orders as low as 0.10 ETH contracts, meaning a trader could build the same strategy using a smaller amount.
The views and opinions expressed here are solely those of theauthorand do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.
Ether (ETH) price tumbled below the $3,000 support on Jan. 21 as regulatory uncertainty continues to weigh down the sector and rumors that the United States Securities and Exchange Commission is reviewing DeFi’s high-yield crypto lending products continue to circulate.
On Jan. 27, the Russian Finance Ministry submitted a crypto regulatory framework for review. The proposal suggests that crypto operations are carried out within the traditional banking infrastructure and that mechanisms to identify traders’ personal data are included.
Further bearish news came as Ryan Korner, a top special agent from the United States Internal Revenue Service (IRS) Criminal Investigation’s Los Angeles field office, issued negative remarks during a virtual event hosted by the USC Gould School of Law. According to Ryan, crypto is the “future,” but ”fraud and manipulation are still rampant in the space.”
Ether bulls are trying to determine whether the Jan. 24 drop to $2,140 was the final bottom for the current downtrend. This 47.5% correction in 30 days caused an aggregate of $1.58 billion in long futures contracts to be liquidated.
Ether/USD price at FTX. Source: TradingView
Notice how Ether’s price has been downtrending for 75 days, respecting a channel that currently holds $2,200 as a support level. On the other hand, a 19% price increase from the current $2,500 to the $3,000 resistance would not necessarily mean a trend reversal.
Curiously, call (buy) option instruments vastly dominate Friday’s $1.1 billion expiry, but bears are better positioned after Ether price stabilized below $3,000.
Ether options aggregate open interest for Jan. 28 expiry. Source: CoinGlass
A broader view using the call-to-put ratio shows an 82% advantage to Ether bulls because the $680 million call (buy) instruments have a larger open interest versus the $410 million put (sell) options. However, the 1.82 call-to-put indicator is deceptive because the price drop below $3,000 caused most bullish bets to become worthless.
For example, if Ether’s price remains below $2,500 at 8:00 am UTC on Jan. 28, only $57 million worth of those call (buy) options will be available. That effect happens because there is no value in the right to buy Ether at $2,500 if it is trading below this level.
Data suggests bulls are set for a significative loss
Below are the three most likely scenarios based on the current price action. The number of options contracts available on Friday for bulls (call) and bear (put) instruments vary depending on the expiry price. The imbalance favoring each side constitutes the theoretical profit:
Between $2,200 and $2,400: 3,200 calls vs. 121,500 puts. The net result is $270 million favoring the put (bear) instruments.
Between $2,400 and $2,700: 19,500 calls vs. 95,500 puts. The net result favors bears by $190 million.
Between $2,700 and $2,900: 34,700 calls vs. 73,400 puts. The net result favors the put (bear) options by $110 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 call option, effectively gaining a negative exposure to Ether above a specific price. But unfortunately, there’s no easy way to estimate this effect.
Bears will try to hold ETH below $2,400
Ether bears need a gentle push below $2,400 to score a $270 million profit on Friday. On the other hand, bulls would need an 8.4% price recovery from the current $2,500 to reduce their loss by 58%.
Considering the bearish regulatory newsflow, Ether bulls are unlikely willing to add more risk right now. Therefore, bulls should concentrate their efforts to partially salvage this defeat by keeping Ether price above $2,500, resulting in a $170 million loss.
January seems to have given Ether bears the upper hand in keeping the pressure on the price in the short term.
The views and opinions expressed here are solely those of theauthorand do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.
Bitcoin (BTC) bulls are probably quite disappointed with how the start of 2022 has shaped up, especially since the cryptocurrency plunged over 20% in the first 25 days of the year. Even more shocking is the fact that the supposed $32,930 bottom on Jan. 21 was the lowest level BTC price had seen in 6 months, while equity markets as measured by the S&P500 reached an all-time high on Jan. 4.
The sell-off in risk markets accelerated after the U.S. Federal Reserve announced its plan to raise interest rates in the coming months, a measure intended to hold back the escalating inflation. For example, Invesco China Technology ETF (CQQQ) traded below $58 on Jan. 22, which was a 20% drop from its peak on Nov. 12.
Regulatory uncertainties continue to weigh on the sector as United States Congressman Patrick McHenry called the “inconsistent treatment and jurisdictional uncertainty” on crypto as a problem. McHenry essentially suggested that Congress should take crypto regulation away from executive agencies and courts.
Bitcoin price recovered, but bulls are still in troubled waters
Bitcoin bulls have little to celebrate after the 12% partial recovery to $38,100 on Jan. 26. First, BTC price is down 35% over the past two months, and more importantly, if Bitcoin trades below $38,000 by the Jan. 28 monthly options expiry bears are set to profit by $350 million.
Bitcoin options aggregate open interest for Jan. 28. Source: Coinglass
At first sight, the $1.52 billion call (buy) options overshadow the $760 million in put options, but the 1.96 call-to-put ratio is deceptive because the recent price drop will likely wipe out most of the bullish bets.
For example, if Bitcoin’s price remains below $38,000 at 8:00 am UTC on Jan. 28, only $72 million worth of those call (buy) options will be available at the expiry. There is no value in the right to buy Bitcoin at $38,000 if BTC is trading below that price.
Bears bag a $315 million profit even with Bitcoin near $39,000
Here are the three most likely scenarios for the $2.3 billion options expiry on Jan. 14. The imbalance favoring each side represents the theoretical profit. In practice, depending on the expiry price, the quantity of call (buy) and put (sell) contracts becoming active varies:
Between $35,000 and $37,000: 660 calls vs. 13,550 puts. The net result is $450 million favoring the put (bear) options.
Between $37,000 and $39,000: 1,300 calls vs. 13,100 puts. The net result is $315 million favoring the put (bear) options.
Between $39,000 and $41,000: 3,710 calls vs. 8,170 puts. The net result favors bears by $180 million.
This crude estimate considers call options being used in bullish bets and put options exclusively in neutral-to-bearish trades. However, this oversimplification disregards more complex investment strategies.
For instance, a trader could have sold a call option, effectively gaining a negative exposure to Bitcoin above a specific price. But unfortunately, there’s no easy way to estimate this effect.
$40,000 is still a stretch
It might seem relatively easy to move Bitcoin price up by 3% and bring the expiry price above $39,000 on Friday’s expiry. However, considering the negative news flow regarding regulation and monetary policy tightening, bulls will likely have a hard time pulling it off.
Therefore, if the current short-term negative sentiment prevails, bears could easily pressure the price down 3% from the current $38,100 down to $36,900 and secure a $450 million profit.
In short, bears completely dominate Jan. 28 monthly options expiry, giving little hope for a $40,000 price recovery in the short-term.
The views and opinions expressed here are solely those of theauthorand do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.
Analysts love to issue price predictions and it seems that 9 out of 10 times they are wrong. For example, how many times did analysts say “we will never see Bitcoin back at X price again,” only to see it plunge well below that level a few months later?
It doesn’t matter how experienced a person is or how connected in the industry. Bitcoin’s (BTC) 55% volatility must be taken seriously and the impact this has on altcoins is usually stronger during capitulation-like movements.
I was undeniably wrong about how much crypto could fall from macro contagion.
I remain bullish on the space as a whole and think it is the most important mega-trend of our times.
I joined CT during 2018 and I will be here with you guys in the coming yrs, bull or bear.
— Zhu Su (@zhusu) January 24, 2022
For those unfamiliar with the case, on Dec. 7, Zhu Su’s Three Arrows Capital acquired $676.4 million worth of Ether (ETH) after its price collapsed 20% over 48 hours. Zhu went as far as saying that he would continue to buy “any panic dump”, despite acknowledging that Ethereum fees were unsuitable for most users.
To understand whether there is still an appetite for bearish bets and how pro traders are positioned, let’s take a look at Bitcoin’s futures and options market data.
Futures traders are unwilling to short
The basis indicator measures the difference between longer-term futures contracts and the current spot market levels. A 5% to 15% annualized premium is expected in healthy markets and this price gap is caused by sellers demanding more money to withhold settlement longer.
On the other hand, a red alert emerges whenever this indicator fades or turns negative, a scenario known as “backwardation.”
Notice how the indicator held the 5% threshold despite the 52% price correction in 75 days. Had pro traders effectively entered bearish positions, the basis rate would have flipped closer to zero or even negative. Thus, data shows a lack of appetite for short positions during this current corrective phase.
Options traders are still in the “fear” zone
To exclude externalities specific to the futures instrument, traders should also analyze the options markets. The 25% delta skew compares similar call (buy) and put (sell) options. The metric will turn positive when fear is prevalent because the protective put options premium is higher than similar risk call options.
The opposite holds when greed is prevalent, causing the 25% delta skew indicator to shift to the negative area.
The 25% skew indicator flipped to the “fear” area as it moved above 10% on Jan. 21. That 17% peak level was last seen in early July 2021, and curiously Bitcoin was trading at $34,000 back then.
This indicator might be interpreted as bearish when also considering that arbitrage desks and market makers are overcharging for downside protection. Still, this metric is backward-looking and usually predicts market bottoms. For example, just two weeks after the skew indicator peaked at 17% on July 5, Bitcoin price bottomed at $29,300.
Correlation with traditional markets is not so relevant
It is worth noting that Bitcoin has been on a downtrend for the past 75 days, and this is before the Federal Reserve’s tightening discourse on Dec. 15. Moreover, the increased correlation with traditional markets does not explain why the S&P 500 index peaked on Jan. 4, while Bitcoin was already down 33% from the $69,000 all-time high.
Considering the lack of bears’ appetite to short BTC below $40,000 and options traders finally capitulating, Bitcoin shows little room for the downside.
Furthermore, Bitcoin futures liquidation over the past week totalled $2.35 billion, which significantly reduced buyers’ leverage. Of course, there are no guarantees that $32,930 was the final bottom, but short sellers will likely wait for a bounce before entering bearish positions.
The views and opinions expressed here are solely those of theauthorand do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.
Bitcoin (BTC) investors seem uncomfortable with adding positions after the most recent 40% correction from the $69,000 all-time high made on Nov. 10. In addition to the prolonged downtrend, remarks from the United States Federal Reserve on Dec. 15 about rising interest rates are also weighing on risk-on assets.
The Fed signaled that it could raise its benchmark rate three times this year and there are plans to increase the pace of its asset purchasing taper.
Consequently, traders are worried that these plans will negatively impact traditional and crypto markets because liquidity will no longer be “easily” available.
Bitcoin price at Coinbase, USD (right) vs. China stock market MSCI index (left)
Cryptoasset regulation in the U.S. has recently been in the spotlight and recently a member of the Securities and Exchange Commission’s Investor Advisory Committee called for the agency to open public comments regarding digital asset regulation.
On Jan. 18, associate law professor J.W. Verret addressed the petition to SEC Secretary Vanessa Countryman and according to Verret, the current path the SEC is taking seems not to recognize that digital assets do not fit within the regulatory framework designed for equity investments.
The professor also questioned what requirements the SEC would consider in approving a Bitcoin spot exchange-traded fund.
$590 million in options expire on Friday
Even though Bitcoin is said to be correlated to traditional markets, BTC derivatives traders were not expecting sub-$44,000 prices according to the Jan. 21 options expiry. Friday’s $590 million open interest will allow bears to score up to $82 million if BTC trades below $41,000 during the expiry.
Bitcoin options aggregate open interest for Jan. 21. Source: Coinglass.com
At first sight, the $380 million call (buy) options vastly surpass the $210 million put (sell) instruments, but the 1.81 call-to-put ratio is deceptive because the recent price drop will likely wipe out most of the bullish bets.
There is no value in the right to buy Bitcoin at $44,000 if it is trading below that price. Therefore, if Bitcoin remains below $44,000 at 8:00 am UTC on Jan. 21, only $64 million of those call (buy) options will be available at the expiry.
Bears are comfortable with Bitcoin price below $42,000
Here are the four most likely scenarios for Friday’s $590 million options expiry. The imbalance favoring each side represents the theoretical profit. In other words, depending on the expiry price, the active quantity of call (buy) and put (sell) contracts varies:
Between $40,000 and $41,000: 30 calls vs. 3,320 puts. The net result is $132 million favoring the put (bear) options.
Between $41,000 and $42,000: 170 calls vs. 2,180 puts. The net result is $82 million favoring the put (bear) instruments.
Between $42,000 and $44,000: 1,480 calls vs. 1,130 puts. The net result is balanced between call and put options.
Between $44,000 and $45,000: 2,980 calls vs. 630 puts. The net result favors call (bull) instruments by $103 million.
This crude estimate considers put options being used in bearish bets and call options exclusively in neutral-to-bullish trades. However, this oversimplification disregards more complex investment strategies.
Bulls need $44,000 to bag a $103 million profit
Regulatory uncertainty and Federal Reserve monetary policies might be reasons for the recent market weakness, but a mere 5% price pump from the current $42,000 level is enough for Bitcoin bulls to profit $103 million in Friday’s expiry.
However, if the current short-term negative sentiment prevails, bears could easily pressure the price below $41,000 and pocket $132 million gains.
Currently, options markets data slightly favor the put (sell) options, but the outcome is yet to be seen.
The views and opinions expressed here are solely those of theauthorand do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.
Ether (ETH) price has bounced 13% from its Jan. 9 low at $2,950, but it seems premature to call the move a cycle bottom. Instead, the larger bearish movement has prevailed and although it looks primarily correlated to Bitcoin (BTC) price, regulatory concerns and a tighter United States Federal Reserve policy have also been blamed for the movement.
BTC and Ether have been under pressure since regulators focused their attention on stablecoins. On Nov. 1, the U.S. Treasury Department urged Congress to ensure that stablecoin issuers are regulated similarly to U.S. banks.
ETH/USD price at FTX. Source: TradingView
Currently, the descending channel formation initiated in mid-November shows resistance at $3,850 resistance. The average network transaction fees have also risen back above $50 and the longer that the Ethereum 2.0 upgrade takes to occur, the better the situation will be for competing chains.
Regardless of the rationale behind Ether’s 28% price drop over the past six weeks, bulls missed the opportunity to secure a $300 million profit in the Jan. 14 weekly options expiry. Unfortunately for them, this $4,500 and higher scenario seems unfeasible at the moment.
Ether options aggregate open interest for Jan. 14. Source: Coinglass.com
The call-to-put ratio shows an 89% advantage for bulls because the $380 million call (buy) instruments have a larger open interest versus the $200 million put (sell) options. The current 1.89 measure is deceptive because the recent Ether price drop caused most of the bullish bets to become worthless.
For example, if Ether’s price remains below $3,300 at 8:00 am UTC on Jan. 14, only $24 million worth of these call (buy) options will be available, but there is no value in having the right to buy Ether at $3,300 if it is trading below that price.
Related:Cointelegraph Consulting – A look at Terra’s ecosystem
Bears need ETH price below $3,300 to secure a $65 million profit
Below are the three most likely scenarios based on the current price action. The number of option contracts available on Jan. 14 for bulls (call) and bear (put) instruments vary depending on the expiry ETH price. The imbalance favoring each side constitutes the theoretical profit:
Between $3,100 and $3,300: 7,400 calls vs. 27,800 puts. The net result favors bears by $65 million.
Between $3,300 and $3,500: 22,200 calls vs. 19,300 puts. The net result is balanced between bulls and bears.
Above $3,500: 32,500 calls vs. 15,600 puts. The net result is $60 million favoring the call (bull) instruments.
This crude estimate considers call options being used in bullish bets and 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 a positive exposure to Ether above a specific price. But, unfortunately, there’s no easy way to estimate this effect.
Bulls don’t stand a chance
Ether bulls would have had a decent $300 million advantage if the price held above $4,500. However, the current scenario requires a 6% positive move from $3,300 to $3,500 to generate a $60 million advantage.
Considering there are less than 12 hours until Friday’s options expiry, bulls will likely concentrate their efforts on keeping the price above $3,300 to balance out the scales.
The views and opinions expressed here are solely those of theauthorand do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.
Bitcoin (BTC) has bounced 11% from the $39,650 low made on Jan.10 and currently the price is battling with the $44,000 level. There are multiple explanations for the recent weakness, but none of them seem sufficient enough to justify the 42% correction that took place since the Nov. 10 all-time high at $69,000.
At the time (Nov. 12), negative remarks from the U.S. Securities and Exchange Commission (SEC) were issued at the rejection of VanEck’s physical Bitcoin exchange-traded fund (ETF). The regulator cited the inability to avoid market manipulation due to unregulated exchanges and heavy trading volume based on Tether’s (USDT) stablecoin.
Then, on Dec. 17, the U.S. Financial Stability Oversight Council recommended that state and federal regulators review regulations and the tools that could be applied to digital assets. On Jan. 5, BTC price corrected again after the Federal Reserve’s December FOMC session, which confirmed plans to ease debt buyback and likely increase interest rates.
Regarding derivatives markets, if Bitcoin price trades below $42,000 by the Jan. 14 expiry, bears will have a $75 million net profit on their BTC options.
Bitcoin options aggregate open interest for Jan. 14. Source: Coinglass
At first sight, the $455 million call (buy) options are overshadowing the $295 million puts, but the 1.56 call-to-put ratio is deceptive because the 14% price drop over the last three weeks will likely wipe out most of the bullish bets.
If Bitcoin’s price remains below $44,000 at 8:00 am UTC on Jan. 14, only $44 million worth of those call (buy) options will be available at the expiry. There is no value in the right to buy Bitcoin at $44,000 if BTC is trading below that price.
Bears might bag a $75 million profit if BTC is below $42,000
Here are the four most likely scenarios for the $750 million options expiry on Jan. 14. The imbalance favoring each side represents the theoretical profit. In practice, depending on the expiry price, the quantity of call (buy) and put (sell) contracts becoming active varies:
Between $40,000 and $43,000: 480 calls vs. 2,220 puts. The net result is $75 million favoring the put (bear) options.
Between $43,000 and $44,000: 1,390 calls vs. 1,130 puts. The net result is balanced between call and put options.
Between $44,000 and $46,000: 1,760 calls vs. 660 puts. The net result is $50 million favoring the call (bull) options.
Between $46,000 and $47,000: 1,220 calls vs. 520 puts. The net result is $125 million favoring the call (bull) options.
This crude estimate considers put options being used in neutral-to-bearish bets and call options exclusively in bullish trades. However, this oversimplification disregards more complex investment strategies.
For instance, a trader could have sold a put option, effectively gaining a positive exposure to Bitcoin (BTC) above a specific price. But, unfortunately, there’s no easy way to estimate this effect.
Related:Traders say Bitcoin run to $44K may be a relief bounce, citing a repeat of December’s ‘nuke’
Bulls need $46,000 for a decent win
The only way bulls can score a significant gain on the Jan. 14 expiry is by sustaining Bitcoin’s price above $46,000. However, if the current short-term negative sentiment prevails, bears could easily pressure the price down 4% from the current $43,800 and profit by up to $75 million if Bitcoin price stays below $42,000.
Currently, options markets seem balanced, giving bulls and bears equal odds for Friday’s expiry.
The views and opinions expressed here are solely those of theauthorand do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.
