Bitcoin Bulls Outweigh Bears as $4.2 Billion in Monthly Options Expires

Regulation remains a top concern for bitcoin bulls, especially after the U.S. Commodity Futures Trading Commission (CFTC) sued Binance for violating trading and derivatives rules. The regulator wants Binance to refund trading profits, revenue, wages, commissions, loans, and fees received from U.S. citizens, and to pay civil penalties for violations.

A shift in sentiment toward risky assets also boosted bitcoin after Federal Reserve Chairman Jerome Powell said raising interest rates was no longer the default move aimed at controlling inflation. The central bank understands that the current situation could “lead to a tightening of credit conditions for households and businesses, which in turn affects economic outcomes.”

Fixed-income investors make more money when interest rates rise, making it less attractive to buy stocks and commodities. As a result, by reversing tactics and adding $339 billion in debt over two weeks, the Fed chose to avoid a banking crisis that could lead to runaway inflation.

With the risk-on asset on an uptrend, bitcoin bulls could stand to gain as much as $1.4 billion when monthly options expire on Friday.

Bitcoin Bear Market Completely Caught Unprepared

Open interest (OI) in options contracts expiring March 31 was $4.2 billion, but the actual figure would be lower as bears expect prices to fall below $26,500. Those traders were surprised when bitcoin rose 32% between March 12 and March 17.

Total Bitcoin options open interest for March 31. Source: CoinGlass

The put ratio of 1.34 reflects an imbalance between $2.4 billion in calls and $1.8 billion in puts. However, only $25 million put options are available if the bitcoin price sustains near $28,000 at 15:00 (UTC) on March 31. This discrepancy occurs because the option to price Bitcoin at $26,000 or $27,000 is worthless if BTC trades above that level at expiration.

Bulls target $29,000

Below are the four most likely scenarios based on current price action. The number of options contracts available for the March 31 calls and puts will vary depending on the expiration price. An imbalance in everyone’s favor constitutes a theoretical profit:

  • From $25,000 to $26,000: 27,200 calls and 12,700 puts. The end result was $360 million in favor of calls (long).
  • From $26,000 to $27,000: 32,300 calls and 8,500 puts. The net result was $620 million in favor of the call option instrument (long).
  • From $27,000 to $28,000: 38,100 calls and 3,000 puts. The bulls extended their advantage to $1.2 billion.
  • From $28,000 to $30,000: 48,300 calls and 400 puts. Bulls win at $1.4 billion.

This rough estimate takes into account calls used in bullish bets and puts exclusively for neutral to bearish trades. Even so, this oversimplification ignores more complex investment strategies.

Bears Best Hope Relies on Regulatory FUD

Bitcoin bulls have until March 31 to push the price above $29,000 for a potential profit of $1.4 billion. Bear’s best bet, on the other hand, is to impose tougher regulation FUD on stablecoins or major cryptocurrency exchanges – so far with no results.

Considering the bullish momentum created by the Fed’s inability to continue raising interest rates, bulls are braced for the BTC monthly option expiration in March. These profits are most likely to be used to strengthen the $28,000 support, so the expected outcome could be particularly disastrous for the bears.

Bitcoin has been hovering around $28,000 for the past ten days and is up 70.5% so far this year. Until March 17, bitcoin was trading below $25,000, which explains why most of the bearish bets on the $4.2 billion options contract expiring in March were at $26,500 or lower.

  • Will Bitcoin’s Rally End Anytime Soon?
  • $112 million in liquidations as Bitcoin tops $29,000

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As reported by Cointelegraph

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