Bitcoin price searches for direction ahead of this week’s $710M BTC options expiration

Bitcoin (BTC) bulls put most of their options at $24,500 and above for the March 3 options expiration, and given the recent bullishness seen from BTC, who can blame them? On February 21, the Bitcoin price briefly traded above $25,200, reflecting an 18% gain in eight days. Unfortunately, regulatory pressure on the crypto sector increased, and despite no effective measures being announced, investors remain cautious and reactive to comments from policymakers.

For example, on February 23, US Securities and Exchange Commission Chairman Gary Gensler claimed that “everything but Bitcoin” falls under the agency’s jurisdiction. Gensler noted that most crypto projects “are securities because there is a group in the middle and the public expects profits based on that group.”

On March 1, comments from two US Federal Reserve (FED) officials reiterated the need for even more aggressive rate hikes to curb inflation. Comments by Minneapolis FED President Neel Kashkaris and Atlanta FED President Raphael Bostic also reduced investors’ expectations for a reversal of monetary policy in 2023.

The stricter stance of the macroeconomic and cryptoregulatory environment caused investors to reassess their exposure to cryptocurrencies. Still, Bitcoin’s price decline virtually wiped out bulls’ expectation of $24,500 or higher options expiring on March 3, so their bets are unlikely to pay off as the deadline nears.

Bulls were “pulled under the rug” by negative regulatory remarks

The open interest for the March 3 options expiration is $710 million, but the actual figure will be lower since bulls got overconfident after Bitcoin traded above $25,000 on February 21.

The call-to-put ratio of 1.12 reflects the imbalance between $400 million call (buy) open interest and $310 million put (sell) options. However, the expected result is likely to be much lower in the case of active open interest.

For example, if Bitcoin’s price remains near $23,600 at 8:00 UTC on March 3, only $50 million worth of these call (call) options will be available. This difference occurs because the right to buy Bitcoin at $24,000 or $25,000 is useless if BTC trades below that level at expiration.

Bjørner has set his trap below $23,000

Below are the four most likely scenarios based on current price action. The number of option contracts available on 3 March for buy (bull) and put (bear) instruments varies, depending on the expiry price. The imbalance favoring each side constitutes the theoretical profit:

• Between $22,000 and $22,500: 700 calls vs. 6200 putts. The net result favors the put (bear) instruments by $120 million.
• Between $22,500 and $23,000: 1000 calls vs. 4800 putts. The net result favors the put (bear) instruments by $85 million.
• Between $23,000 and $24,000: 2,100 calls vs. 1,800 sets. The net result is balanced between bulls and bears.
• Between $24,000 and $25,000: 4,900 calls vs. 400 putts. The net result favors the call (bull) instruments by $110 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.

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

Related: Bitcoin’s Least Volatile Month Ever? BTC Price Ends February Up 0.03%

Could Weak US Mortgage Applications Benefit BTC Bulls?

Bitcoin bulls need to push the price above $24,000 on March 3 to secure a potential profit of $110 million. However, data from the Mortgage Bankers Association’s announcement on March 1 could turn the tide in BTC’s favor. Weekly mortgage applications fell by 44% compared to the same period in 2022, hitting a 28-year low.

Considering the negative pressure from regulators and investors looking at the next FED decision on March 22, bears have good chances to push BTC below $23,000 and profit by $85 million by the expiration of weekly options on March 3. Still, there is hope for Bitcoin bulls depending on how traditional markets react to bearish mortgage application data.

This article does not contain investment advice or recommendations. All investment and trading moves involve risk and readers should conduct their own research when making a decision.

The views, thoughts and opinions expressed herein are those of the authors alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.