Bitcoin options data shows bulls targeting $17K BTC price by Friday’s expiration

The Bitcoin (BTC) price crashed to $15,500 on November 21, driving the price to its lowest level in two years. The 2-day long correction represented an 8% downtrend and wiped out $230 million worth of long (buy) futures contracts.

The price action gave bears the false impression that a sub-$15,500 exit at the December 9 options expiration was feasible, but those bets are unlikely to pay off as the deadline nears.

So far this year, the Bitcoin price is down 65% for 2022, but the leading cryptocurrency remains a top 30 global tradable asset class ahead of tech giants such as Meta Platforms ( META ), Samsung ( 005930.KS ) and Coca-Cola ( KO ).

Investors’ main concern remains the possibility of a recession if the US central bank raises interest rates longer than expected. Evidence of this comes from data from Dec. 2 that showed 263,000 jobs were created in November, signaling that the Fed’s efforts to slow the economy and bring down inflation remain a work in progress.

On Dec. 7, Wells Fargo CEO Azhar Iqbal wrote in a note to clients that “all told, financial indicators point to a recession on the horizon.” Iqbal added, “along with the inverted yield curve, markets are clearly primed for a recession in 2023.”

Bjørner was far too pessimistic and will suffer the consequences

The open interest for the December 9 expiration of the options is $320 million, but the actual number will be lower since the bears expected price levels below $15,500. These traders became confident after Bitcoin traded below $16,000 on November 22.

The call-to-put ratio of 1.19 reflects the imbalance between $175 million call (buy) open interest and $145 million put (sell) options. Currently, Bitcoin is at $16,900, which means that most bearish bets will likely become worthless.

If Bitcoin’s price remains near $17,000 at 08:00 UTC on December 9, only $16 million worth of these put (put) options will be available. This difference occurs because the right to sell Bitcoin at $16,500 or $15,500 is useless if BTC trades above that level at expiration.

The Bulls are targeting $18k to secure a $130m profit

Below are the four most likely scenarios based on current price action. The number of option contracts available on 9 December for buy (bull) and put (bear) instruments varies, depending on the expiry price. The imbalance favoring each side constitutes the theoretical profit:

• Between $15,500 and $16,500: 200 calls vs. 2100 putts. The net result favors the put (bear) instruments by $30 million.
• Between $16,500 and $17,000: 1,700 calls vs. 1,500 putts. The net result is balanced between bears and bulls.
• Between $17,000 and $18,000: 5,500 calls vs. 100 putts. The net result favors the call (bull) instruments by $100 million.
• Between $18,000 and $18,500: 7300 calls vs. 0 putts. The Bulls completely dominate the draft by making $130 million.

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

For example, a trader could have sold a put option, effectively gaining positive exposure to Bitcoin above a certain price, but unfortunately there is no easy way to estimate this effect.

Related: Institutional investors are still looking at crypto despite the FTX collapse

Bulls likely have less margin to support the price

Bitcoin bulls need to push the price above $18,000 on Friday to secure a potential profit of $130 million. On the other hand, the bears’ best-case scenario calls for a slight push below $16,500 to maximize gains.

Bitcoin bulls had just liquidated long positions of $230 million in two days, so they may have less margin required to support the price.

Considering the negative pressure from traditional markets due to recession concerns and rising interest rates, bears are likely to avoid losses by keeping Bitcoin below $17,000 on December 9.