$475M in Bitcoin Options Expires This Week — Are Bulls or Bears Set to Win?

Bitcoin (BTC) has been posting higher lows for the past eight weeks, but during this time, BTC has been unable to turn the $24,000 resistance to support on at least three different possibilities. This is precisely why the $475 million Bitcoin options expiration on August 12 could be a game changer for bulls.

Considering the current regulatory pressure in the game, that seems like a good enough rationale to avoid bullish plays, especially after the US Securities and Exchange Commission pressed charges against a former Coinbase executive for illegal securities trading on July 21.

The added impact of the Terra (Luna) – now renamed Terra Classic (LUNC) – ecosystem imploding and subsequent crypto venture capital firm Three Arrows Capital (3AC) filing for bankruptcy continues to weigh on markets. The latest victim is crypto lending platform Hodlnaut, which suspended user withdrawals on August 8.

For this reason, most traders are holding back their bets above $24,000, but events outside the crypto market may have also negatively affected investors’ expectations. For example, according to regulatory filings released on August 9, Elon Musk sold Tesla shares for $6.9 billion.

On August 8, Ark Investment CEO Cathie Wood explained that the 1.41 million Coinbase (COIN) shares sold in July were caused by regulatory uncertainty and its potential impact on the crypto exchange’s business model.

Most bearish bets are below $23,000

Bitcoin’s failure to break below $21,000 on July 27 surprised bears because only 8% of August 12 put (sell) options have been placed above $23,000. Thus, Bitcoin bulls are better positioned for the expiration of $475 million weekly options .

A broader view using the 1.23 call-to-put ratio shows more bullish play as call (buy) open interest stands at $262 million versus $212 million puts. Nonetheless, with Bitcoin currently above $23,000, most bearish bets will likely be worthless.

If Bitcoin’s price remains above $23,000 at 08:00 UTC on August 12, only $16 million of these put options will be available. This difference occurs because there is no use for the right to sell Bitcoin at $23,000 if it trades above that level at expiration.

The Bulls could have a profit of $150 million

Below are the four most likely scenarios based on current price action. The number of option contracts available on 12 August for buy (bull) and put (bear) instruments varies, depending on the expiry price. The imbalance favoring each side constitutes the theoretical profit:

• Between $21,000 and $22,000: 70 calls against 4200 putts. The net result favors bears by $90 million.
• Between $22,000 and $24,000: 1,600 calls vs. 1460 putts. The net result is balanced between bulls and bears.
• Between $24,000 and $25,000: 3700 calls vs. 120 putts. The net result favors bulls by $90 million.
• Between $25,000 and $26,000: 5,900 calls vs. 30 putts. Bulls increase winnings to $150 million.

This rough estimate considers the call options used in bullish plays and the put options exclusively in neutral-to-bearish trades. Yet this oversimplification ignores more complex investment strategies.

Related: Bitcoin braces on US inflation data as CPI nerves stall BTC price gains

Futures markets show that bulls are less likely to show strength

Bitcoin bears need to push the price below $24,000 on August 12 to balance their weight and avoid a potential loss of $150 million. However, Bitcoin bulls got $265 million worth of long futures positions liquidated between August 8 and 9, so they are less likely to push the price higher in the short term.

That said, the most likely scenario for August 12th is the $22,000 to $24,000 range, giving a balanced outcome between bulls and bears. Considering Bitcoin’s negative performance of 50% so far this year, even a small gain of $90 million for bulls can be considered a victory, but it will require sustaining BTC above $24,000.

The views and opinions expressed herein are solely those of author and do not necessarily reflect the views of Cointelegraph. Every investment and trade involves risk. You should do your own research when making a decision.