Breaking the downtrend and watching the uptrend in the price of Bitcoin (BTC) for several months increased the belief that the six-digit value will become a reality.
If Bitcoin enters a parabolic move towards $ 110,000, it will eventually match PlanB’s stock-to-flow (S2F) model prediction. According to PlanB, the lack of gold and other precious metals and “Elon Musk’s negative energy on energy and pressure on China’s mining operations” are behind the mismatch with the price forecasting model. The price prediction model has fallen more than 50 percent in the last five months.
The bulls’ hopes mostly hinge on an exchange-traded fund (ETF), which is likely to be approved by the United States Securities and Exchange Commission (SEC). There are several applications pending review between October 18 and November 1, but regulators may delay their final decision.
Related: What is a Bitcoin Option? How do options contracts work?
The expiration of the $ 830 million option on Friday was heavily affected by the 20 percent price increase that began Oct. 4, which likely eliminated 92 percent of the put options.
After mining pressure from China, another major event that could boost investor confidence was that the United States gained 35.4 percent of Bitcoin’s hash rate.
As reported by Cointelegraph, large-scale Bitcoin mining hubs are expected to form in the states of Texas and Ohio, effectively increasing the share of the US cryptocurrency market.
Oct 8 options are profitable for bulls
After an estimated net profit of $ 370 million from the expiration of BTC options last week, the bulls have had more opportunity to move, and the effects are evident in the expiration of $ 820 million this Friday. This advantage explains the move from neutral to bearish, since the open interest of call options is 43 percent higher than that of put options.
As the data above shows, the bears have invested $ 335 million by the end of Friday, but they seem surprised that 92 percent of the put options are likely to lose their value.
In other words, if Bitcoin sustains above $ 56,000 on Friday, $ 36 million in bearish neutral put options will be triggered.
Bulls have reason to push BTC price above $ 58,000
Listed below are the four most likely scenarios for it to end on Friday. The imbalance in favor of both parties represents a theoretical benefit. In other words, the number of activated buy and sell contracts can vary depending on the expiration price:
- From $ 52,000 to $ 54,000: 2,110 sales versus 3,140 purchases. The net result is $ 55 million in favor of the purchase (bull).
- From $ 54,000 to $ 56,000: 1,240 sales versus 3,700 purchases. The net result is $ 130 million in favor of the buy (bullish).
- From $ 56,000 to $ 58,000: 4,850 purchases versus 680 sales. The net result is $ 235 million in favor of the buy (bullish).
- More than $ 58,000: 190 sales versus 6,230 purchases. The net result is complete dominance with the bulls making a profit of $ 350 million.
This gross estimate takes into account that call options are used only on bullish prospects, and options for neutral to bearish trading are preferred. However, investors may have used a more complex strategy, often involving different expiration dates.
Bears need a 7 percent price correction to cut losses
In each scenario, the bulls have absolute control over the end of Friday and there are several reasons to keep the price above $ 56,000. On the other hand, bears need a negative 7% action below $ 54,000 to avoid a loss of $ 235 million or more.
However, traders should consider that during bullish rallies, the effort required by the seller to keep the price under pressure is too great and often ineffective. The analysis points to a significant lead in call options, fueling the possibility of a further rally in the coming week.
The opinions and comments expressed in this document are solely to the author belongs. It may not reflect the views of Cointelegraph. All investment and trading involves risk. You should do your own research when making a decision.