$ 2 billion worth of Bitcoin (BTC) options will expire on Friday, August 27. Some analysts argue that strong call option buying activity on August 22 was likely the catalyst for the recent $ 50,000 price test.
Digital Asset Trading Company QCP Capital mentioned in its market update that one entity has been “constantly pushing (option) prices up in recent weeks.” The activity, which took place during the morning trading session in Asia, aggressively bought bullish options in parts of 100 BTC contracts each.
The report also mentions the exhaustion of short-term regulatory concerns, as crypto-related decisions by the Senate Banking Committee and regulators are unlikely to bear fruit in 2021.
Bears may be analyzing different data
However, the most recent report “The Week On Chain” from blockchain analytics provider Glassnode included some troubling data from Bitcoin on-chain activity. This analysis found that the number of transactions adjusted by the entity has not responded to the bullish action in progress.
Furthermore, Decentrader, a cryptocurrency market intelligence provider, highlighted insufficient trading volume during this recent move to push the price of BTC above $ 52,000.
Friday will be a major test of the $ 50,000 level as 4,372 BTC options contracts await the $ 218 million decision.
Initial call-to-put analysis shows the vast dominance of call instruments from neutral to bullish, with open interest 60% higher. However, the bulls might have been overly optimistic, as 68% of their bets have been placed at $ 50,000 or more.
Related: Bitcoin Turns Down $ 51K After Michael Saylor Reveals New BTC Buy – What’s Next?
91% of put options will likely be worthless at expiration.
On the other hand, 91% of the protection put options have been placed at $ 46,000 or less. Those bearish neutral instruments will lose their value if Bitcoin trades above that price on Friday. Options expiration occurs at 8:00 am UTC, so some additional volatility is expected before the event.
Below are the four most likely scenarios, considering current price levels. The imbalance that favors either party represents the potential benefit of expiration, considering that call options are used more frequently in bullish strategies, while protective put options are used in neutral to bearish operations.
- Under $ 45,000: 4,040 calls versus 2,500 put options. The net result is a $ 69 million advantage for bullish-neutral instruments.
- Above $ 46,000: 6,500 calls versus 1,300 put options. The net result is $ 239 million in favor of bullish neutral instruments.
- Above $ 48,000: 7,400 calls versus 420 put options. The net result is a $ 335 million advantage for bullish neutral instruments.
- Above $ 50,000: 12,000 calls versus 35 put options. The net result is a $ 600 million advantage for bullish neutral instruments.
The data above shows how many contracts will be available on Friday, depending on the expiration price. There is no way to measure the bottom line for each market participant, as some investors may be trading more complex strategies, including market neutrals that use both hedging call and put options.
Those two competing forces will show their strength as the bears try to minimize the damage. Either way, the bulls are in complete control of Friday’s expiration, and there seems to be enough incentive for them to defend the $ 48,000 level and even attempt a more significant gain by pushing the price above $ 50,000.
In the meantime, bears should focus on the September expiration, albeit bearing in mind that El Salvador is expected to introduce Bitcoin as legal tender next month. Additionally, the country is building the infrastructure to support a state-issued Bitcoin wallet called Chivo.
The views and opinions expressed here are solely those of the Author and do not necessarily reflect the views of Cointelegraph. Every investment and trade movement involves risk. You should do your own research when making a decision.