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Bitcoin options data shows whales betting big — Will $50K BTC come in January?

Institutional investor interest soars as Bitcoin options open interest hits record high.

Bitcoin (BTC) options open interest reached an unprecedented milestone, surging to a staggering $20.5 billion on Dec. 7. This signifies the active involvement of institutional investors in the cryptocurrency space. Unlike futures contracts, BTC options have predetermined expiration prices, offering valuable insights into traders’ expectations and market sentiment.

At the forefront of the Bitcoin options market stands Deribit, boasting a 90% market share. The exchange currently holds a substantial $2.05 billion open interest for options expiring on Jan. 26. However, many of these bets may lose their value as the deadline approaches.

Nonetheless, with the prospect of a spot exchange-traded fund (ETF) gaining regulatory approval, previously sidelined bullish bets are reentering the playing field.

Bitcoin price continues to drop, but how are pro BTC traders positioned?

Data shows top traders futures’ Bitcoin long-to-short at the lowest level in 30 days, but what does this mean for BTC’s short-term price action.

Bitcoin (BTC) has experienced a remarkable 15.7% price surge in the first six days of December. This surge has been heavily influenced by the anticipation of an imminent approval of a spot exchange-traded fund (ETF) in the United States. Senior Bloomberg ETF analysts have expressed a 90% probability for approval by the U.S. Securities and Exchange Commission, which is expected before Jan. 10.

However, Bitcoin’s recent price surge may not be as straightforward as it seems. Analysts have failed to consider the multiple rejections at $37,500 and $38,500 during the second half of November. These rejections have left professional traders, including market makers, questioning the market’s strength, particularly from the perspective of derivatives metrics.

Bitcoin’s 7.6% rally to $37,965 on Nov. 15 resulted in disappointment as the movement fully retracted the following day. Similarly, between Nov. 20 and Nov. 21, Bitcoin’s price declined by 5.3% after the $37,500 resistance proved more formidable than anticipated.

Healthy Bitcoin rally: What does a margin lending ratio drop mean for BTC price?

Will the $30,000 BTC price hold? Bitcoin market structure remains bullish, with another 10% gain on the table as sellers refrain from shorting.

Bitcoin (BTC) price rallied over 10% between April 9 and April 14, marking the highest daily close in over 10 months. While some analysts may argue the move justifies a degree of decoupling from traditional markets, both the S&P 500 and gold are near their highest levels in over six months.

Bitcoin price breaks $30,000 despite macro headwinds

Bitcoin’s gains and rally above $30,000 also happened while the U.S. Dollar Index (DYX), which measures the currency against a basket of foreign exchanges, reached its lowest level in 12 months.

The indicator fell to 100.8 on April 14 from 104.7 one month prior as investors priced in higher odds of further liquidity injections by the United States Federal Reserve.

The latest Federal Reserve’s monetary policy meeting minutes, released on April 12, made explicit reference to the anticipation of a “mild recession” later in 2023 due to the banking crisis. Even if inflation is no longer a primary concern, the monetary authority has little room to raise interest rates further without escalating an economic crisis.

Even if inflation is no longer a primary concern, the monetary authority has little room to raise interest rates further without escalating an economic crisis.

Strong macroeconomic data explains investors’ bullishness

While the global economy may deteriorate in the coming months, recent macroeconomic data has been mostly positive. For example, the European Union’s statistics office reported that industrial production in the 20 member countries increased 1.5% month on month in February, whereas economists polled by Reuters expected a 1% increase.

Furthermore, China’s latest macroeconomic data showed an encouraging trend, with exports increasing 14.8% year on year in March, snapping a five-month decline and surprising economists who expected a 7% decline. As a result, China’s trade balance for March was $89.2 billion, far exceeding the $39.2 billion market consensus.

The contrast between the current economic momentum and the forthcoming recession triggered by higher financing costs and a reduced appetite for risk among lenders causes Bitcoin investors to question the sustainability of the $30,000 support.

Let’s look at Bitcoin derivatives metrics to better understand how professional traders are positioned in the current market environment.

BTC derivatives show no excessive leverage from longs

Margin markets provide insight into how professional traders are positioned because they allow investors to borrow cryptocurrency to leverage their positions.

OKX, for instance, provides a margin lending indicator based on the stablecoin/BTC ratio. Traders can increase exposure by borrowing stablecoins to buy Bitcoin. On the other hand, Bitcoin borrowers can only bet on the decline of a cryptocurrency’s price.

*OKX stablecoin/BTC margin lending ratio. Source: OKX*

The above chart shows that OKX traders’ margin lending ratio decreased between April 9 and April 11. That is extremely healthy as it shows no leverage has been used to support Bitcoin’s price gains, at least not using margin markets. Moreover, given the general bullishness of crypto traders, the current margin lending ratio of 15 is relatively neutral.

The long-to-short metric excludes externalities that might have solely impacted the margin markets. In addition, it gathers data from exchange clients’ positions on the spot, perpetual and quarterly futures contracts, thus offering better information on how professional traders are positioned.

There are occasional methodological discrepancies between different exchanges, so readers should monitor changes instead of absolute figures.

*Exchanges’ top traders Bitcoin long-to-short ratio. Source: Coinglass*

Interestingly, despite Bitcoin breaking $30,000 for the first time in 10 months, pro traders have kept their leverage long positions unchanged, according to the long-to-short indicator.

For instance, the ratio for Huobi traders stood firm near 0.98 from April 9 until April 14. Meanwhile, at crypto exchange Binance, the long-to-short slightly increased, favoring longs, moving from 1.12 on April 9 to the current 1.14. Lastly, at crypto exchange OKX, the long-to-short ratio slightly declined, from 1.00 on April 9 to the current 0.91.

Moreover, Bitcoin futures traders were not confident enough to add leveraged bullish positions. Thus, even if Bitcoin’s price retests $29,000 in terms of derivatives, bulls should be unconcerned because there has been little demand from short-sellers and no excessive leverage from buyers.

In other words, Bitcoin’s market structure is bullish, where BTC’s price can quickly rally another 10% to $33,000, given sellers are currently reluctant to short it.

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

Bitcoin derivatives data shows bulls positioning for further BTC price upside

BTC price continues to show strength, and derivatives data suggests that bulls intend to press Bitcoin higher.

Bitcoin (BTC) price maintained the $30,000 support as lower-than-expected U.S. Consumer Price Index (CPI) data was released on April 12. The official inflation rate for March increased 5% year on year, which was slightly less than the 5.1% consensus. It was the lowest reading since May 2021 but is still significantly higher than the U.S. Federal Reserve’s 2% target.

The data suggests that inflation is no longer the driving force behind Bitcoin’s rally, and investors’ focus has shifted from the impact of inflationary pressure to potential recession risks after the banking crisis revealed how fragile the financial system was following the Federal Reserve’s 12-month hike in interest rates from 0.10% to 4.85%.

Aside from the Silicon Valley Bank bankruptcy and the government-backed sale of Credit Suisse to UBS, several warning signs of a macroeconomic downturn have emerged.

The most recent ISM Purchasing Managers Index data fell to its lowest level since May 2020, indicating an economic contraction. According to Federal Reserve documents released on April 12, the aftermath of the U.S. banking crisis is likely to push the economy into a “mild recession” later this year. Because of the crisis, some have speculated that the Fed will hold off on raising interest rates, but officials affirmed that more effort is needed to keep inflation under control.

According to a Moody’s Analytics report, commercial real estate prices fell 1.6% in February, the most since the 2008 financial crisis. Furthermore, the national office vacancy rate reached 16.5%, indicating the severity of the economic difficulties that businesses are currently facing.

Whatever the reason for Bitcoin’s 50% rally between March 11 and April 11, it demonstrates resilience to FUD — fear, uncertainty and doubt — including the Securities and Exchange Commission’s Wells notice against Coinbase on March 22 and the Commodity Futures Trading Commission filing a suit against Binance and its CEO, Changpeng Zhao, on March 27. By holding the $30,000 support, Bitcoin demonstrates that the positive momentum can continue regardless of whether inflation remains above 5%.

Bulls are better positioned for the weekly BTC options expiry

Not everyone is cheering the rally, particularly traders who have placed bearish bets using Bitcoin options. The April 14 open interest for BTC options expiry is $950 million, with $490 million in call (buy) options and $460 million in put (sell) options. Bears have been caught off guard, with less than 7% of their bets exceeding $29,000.

*Bitcoin options aggregate open interest for April 14. Source: CoinGlass*

Below are the four most likely scenarios based on the current price action. The number of call (buy) and put (sell) options contracts available on April 14 varies depending on the expiry price. The imbalance favoring each side constitutes the theoretical profit:

Between $28,000 and $29,000: 2,600 calls vs. 1,800 puts. The net result is balanced between call and put options.
Between $29,000 and $30,000: 6,700 calls vs. 500 puts. The net result favors the call (buy) instruments by $110 million.
Between $30,000 and $30,500: 8,500 calls vs. 200 puts. Bulls increase their advantage to $250 million.
Between $30,500 and $31,500: 11,300 calls vs. 100 puts. Bulls’ advantage increases to $350 million.

This rough estimate considers only call options in bullish bets and put options in neutral-to-bearish trades. Nonetheless, this oversimplification excludes more complex investment strategies. A trader, for example, could have sold a put option, effectively gaining positive exposure to Bitcoin above a certain price, but this effect is difficult to estimate.

Bears are unlikely to reverse their situation

Bulls are expected to push Bitcoin above $30,500 on April 14 at 8:00 am UTC to profit an additional $100 million. Bears, on the other hand, would need to pressure Bitcoin’s price below $29,000 in order to balance the scales. However, bears recently suffered significant losses as BTC futures short contracts were forcibly liquidated to the tune of $128 million between April 9 and April 11.

As the most likely scenario favors Bitcoin bulls, their profits will most likely be used to reinforce the $30,000 support. Bears might consider licking their wounds and waiting for additional actions from regulators, as the macroeconomic scenario is currently bullish for supply-capped assets.

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

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

$1.12B in Bitcoin options expire this week, and bulls appear to be at a disadvantage

Commodities rallied as the United States Treasury struggled with the banking crisis, but Bitcoin bulls also overplayed their hand in this week’s options expiry.

Bitcoin’s (BTC) 43% rally between March 10 and March 20 surprised options traders and this is proven by the minimal14% of the $1.12 billion open interest set to expire on April 7 being placed at $28,000 and higher.

The positive price movement can be partially attributed to an increase in commodity demand, as investors perceive risks in the central bank’s emergency funding programs, as injecting liquidity causes inflationary upward pressure.

According to Urban Angehrn, CEO of the Swiss Financial Market Supervisory Authority (FINMA), if Credit Suisse had not been rescued, “many other Swiss banks would probably have faced a run on deposits.” Angehrn added that “there was a high probability that the resolution of a global systemically important bank would have led to contagion effects and jeopardized financial stability in Switzerland and globally.”

Investors’ appetite for commodities vastly increased after the U.S. Treasury Department reportedly discussed the possibility of expanding the Federal Deposit Insurance Corporation insurance for bank deposits on March 21. Oil prices measured by the WTI have rallied 23.5% since March 20, and gold broke above $2,000 on April 5 — its highest daily close since Aug. 2020.

An unexpected shockwave on a $33 trillion asset class that was previously thought to be a safe haven for inflation could have benefited the commodity sector as well. Morgan Stanley Wealth Management has issued a warning about the commercial real estate market, predicting trouble with refinancing.

According to the bank’s report, the sector has been hard hit by increases in remote work and corporate layoffs, resulting in vacancy rates reaching a 20-year high. As a result, investment bank strategists predict a 40% drop in commercial real estate prices and state that “more than 50% of the $2.9 trillion in commercial mortgages will need to be renegotiated in the next 24 months when new lending rates are likely to be up by 350 to 450 basis points.”

Bitcoin bulls may have benefited from increased demand for inflation protection, but some may have squandered the opportunity by placing size bets of $30,000 or higher.

Bulls placed 85% more bets, which did not translate to victory

The weekly BTC options expiry has $1.2 billion in open interest, but the actual figure will be lower because bulls have concentrated their bets on Bitcoin price trading above $29,000.

*Bitcoin options aggregate open interest for April 7. Source: CoinGlass*

The 1.85 call-to-put ratio reflects the difference in open interest between the $720 million call (buy) options and the $390 million put (sell) options. However, the outcome will be much lower as bulls were overly optimistic.

For instance, if Bitcoin’s price remains near $28,100 on April 7 at 8:00 am UTC, there will be only $125 million in call options. This distinction arises since the right to buy Bitcoin at $29,000 or $30,000 is rendered void if BTC trades below that on the expiry.

Bulls and bears have similar incentives, so the outcome is unpredictable

Below are the four most likely scenarios based on the current price action. The number of options contracts available on April 7 for call (buy) and put (sell) instruments varies depending on the expiry price. The imbalance favoring each side constitutes the theoretical profit:

Between $26,000 and $27,000: 300 calls vs. 6,000 puts. The net result favors the put (sell) instruments by $150 million.
Between $27,000 and $28,000: 1,200 calls vs. 3,500 puts. The net result favors the put instruments by $60 million.
Between $28,000 and $29,000: 4,500 calls vs. 1,100 puts. Bulls flip the tables and profit $100 million.
Between $29,000 and $30,000: 8,500 calls vs. 100 puts. Bulls’ advantage increases to $240 million.

This rough estimate considers only put options in bearish bets and call options in neutral-to-bullish trades. Nonetheless, this oversimplification excludes more complex investment strategies. A trader, for example, could have sold a call option, effectively gaining negative exposure to Bitcoin above a specific price, but this effect is difficult to estimate.

The critical level for the weekly expiration is $28,000, but it is impossible to predict the outcome due to increased economic recession risks and market volatility. If bulls are able to secure a $100 million, those funds will most likely be used to further strengthen the support level.

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

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

3 key Ethereum price metrics cast doubt on the strength of ETH’s recent rally

ETH’s price is showing strength, but network and derivatives data suggest that ETH will struggle to hold the $1,850 price level.

Ether’s (ETH) price had been battling the $1,850 resistance level, but it broke through on April 4 when Ether rallied to a seven-month high above $1,900. Recently there has been a lot of speculation on Ether price catalysts. Let’s see if it’s possible to identify any fundamental factors behind the price movement.

The upcoming Shanghai hard fork could be one factor in Ether’s recent bullish momentum. On April 12, the ability for validators to withdraw their deposits opens, giving staking participants freedom of movement but also creating a sell-off risk for Ether.

There are now 17.81 million ETH staked on the Beacon Chain, though some safeguards have been put in place to prevent a flood of Ether from disrupting the market. For example, because there is a daily limit of 2,200 withdrawals, the maximum daily unlocks are 70,000 ETH.

Scalability and selfish validator risks are still present

The upcoming Shanghai fork, however, does not address some of the most pressing issues currently plaguing the Ethereum network. Scalability continues to be a major issue for most users, as the average transaction fee has hovered around $5 in recent weeks, driving users away from decentralized applications (DApps).

Furthermore, the current consensus mechanism favors rogue miners who outperform other network participants, a phenomenon known as miner extractable value (MEV). They can quickly duplicate all winning deals from the mempool and execute their transactions ahead of others by ultimately deciding which transactions are completed in the block.

A recent example, highlighted on April 3 by security firm CertiK, resulted in $25 million in losses to arbitrage bots that were attempting to purchase and flip tokens in a short period of time for a profit as a selfish validator replaced the transactions.

Over the last 30 days, the top 10 DApps running on the Ethereum network saw an 18% drop in active addresses, possibly reflecting investor dissatisfaction with the ongoing issues with miners front-running and high transaction costs.

*30-day Dapp activity. Source: DappRadar*

Let’s look at Ether derivatives data to understand if the $1,850 level can effectively become a support according to ETH investors’ sentiment.

ETH derivatives show no improvement despite the price rally

The annualized three-month futures premium should trade between 5% and 10% in healthy markets to cover costs and associated risks. However, when the contract trades at a discount (backwardation) versus traditional spot markets, it shows a lack of confidence from traders and is deemed a bearish indicator.

*Ether 3-month futures annualized premium. Source: Laevitas.ch*

Despite ETH’s 35% rally in 25 days, the Ether futures premium has been unable to break above the 5% neutral threshold. However, the absence of leverage longs demand does not always imply an expectation of negative price action. As a result, traders should examine Ether’s options markets to understand how whales and market makers price the likelihood of future price movements.

The 25% delta skew is a telling sign when market makers and arbitrage desks are overcharging for upside or downside protection. For instance, in bear markets, options investors give higher odds for a price dump, causing the skew indicator to rise above 8%. On the other hand, bullish markets tend to drive the skew metric below -8%, meaning bearish put options are in less demand.

*Ether 60-day options 25% delta skew: Source: Laevitas.ch*

Since April 1, the delta skew has been close to zero, indicating a similar demand for protective put options and neutral-to-bearish call instruments. Since March 22, when Ether options last showed extreme optimism, this has been the norm.

Even after adjusting for the additional negative pressure from the Shanghai hard fork token unlock, Ether faces serious problems due to scalability and transaction front-runs. As a result, derivatives and on-chain DApp metrics increase the likelihood of ETH falling below $1,850.

Magazine: ‘Account abstraction’ supercharges Ethereum wallets: Dummies guide

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

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

3 reasons why Bitcoin bulls are well positioned to profit from this week’s $4.2B options expiry

$4.2 billion in BTC options expire on March 31, and despite weeks of harsh regulatory action against the crypto sector, bulls are well positioned to profit.

Regulation continues to be the primary concern for Bitcoin bulls, especially after the Commodity Futures Trading Commission (CFTC) sued Binance for trading and derivatives law violations. The regulator wants Binance to repay the trading profits, revenues, salaries, commissions, loans and fees it received from United States citizens, as well as paying civil penalties for the violations.

Bitcoin’s (BTC) rise was also fueled by a shift in sentiment toward risk assets after U.S. Federal Reserve Chair Jerome Powell said interest rate hikes are no longer the default move to curb inflation. The central bank understood that the current situation will likely “result in tighter credit conditions for households and businesses, which would in turn affect economic outcomes.”

Fixed-income investors earn more when interest rates rise, so buying stocks and commodities becomes less appealing. As a result, by reversing the strategy and adding $339 billion in liabilities in two weeks, the Fed chose to contain the banking crisis, which may cause inflation to spiral out of control.

Given the accretive scenario for risk assets, Bitcoin bulls can profit up to $1.4 billion in Friday’s monthly options expiry.

Bitcoin bears were caught completely off-guard

The open interest for the March 31 options expiry is $4.2 billion, but the actual figure will be lower since bears were expecting sub-$26,500 price levels. These traders were caught by surprise as Bitcoin gained 32% between March 12 and March 17.

*Bitcoin options aggregate open interest for March 31. Source: CoinGlass*

The 1.34 call-to-put ratio reflects the imbalance between the $2.4 billion call (buy) open interest and the $1.8 billion put (sell) options. However, if Bitcoin’s price remains near $28,000 at 8:00 am UTC on March 31, only $25 million worth of these put (sell) options will be available. This difference happens because the right to sell Bitcoin at $26,000 or $27,000 is useless if BTC trades above that level on expiry.

Bulls aim for $29,000 to secure a record-breaking $1.4 billion profit

Below are the four most likely scenarios based on the current price action. The number of options contracts available on March 31 for call (bull) and put (bear) instruments varies, depending on the expiry price. The imbalance favoring each side constitutes the theoretical profit:

Between $25,000 and $26,000: 27,200 calls vs. 12,700 puts. The net result favors the call (bull) instruments by $360 million.
Between $26,000 and $27,000: 32,300 calls vs. 8,500 puts. The net result favors the call (bull) instruments by $620 million.
Between $27,000 and $28,000: 38,100 calls vs. 3,000 puts. Bulls increase their advantage to $1.2 billion.
Between $28,000 and $30,000: 48,300 calls vs. 400 puts. Bulls dominate by profiting $1.4 billion.

This crude estimate considers the call options used in bullish bets and the put options exclusively in neutral-to-bearish trades. Even so, this oversimplification disregards more complex investment strategies.

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

The bears best hope relies on regulatory FUD

Bitcoin bulls must push the price above $29,000 by March 31 to secure a potential $1.4 billion profit. Bear’s best shot, on the other hand, is more regulatory FUD about stablecoins or major crypto exchanges — which has so far been fruitless.

Considering the bullish momentum created by the Fed’s inability to continue raising interest rates, bulls are well positioned for the March BTC monthly options expiry. Most likely, those profits will be used to further strengthen the $28,000 support, so the expected outcome is especially concerning for bears.

Bitcoin has been hovering around $28,000 for the past ten days, but the cryptocurrency has gained 70.5% year to date. Until March 17, Bitcoin was trading below $25,000 and this explains why most bearish bets for March’s $4.2 billion options expiry were placed at $26,500 or lower.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

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

Bitcoin price holds its ground in the wake of CFTC case against Binance

BTC options and derivatives markets seem unfazed by the CFTC’s recent action against Binance, but is that a good or a bad sign?

The price of Bitcoin (BTC) fell 3.6% to $26,900 after Binance and CEO Changpeng “CZ” Zhao were sued by the United States Commodity Futures Trading Commission on March 27. To date, Binance has been investigated by the CFTC, Securities and Exchange Commission, the Internal Revenue Service and federal prosecutors.

The Bitcoin price correction may have been limited due to Silicon Valley bank’s successful asset sale to First Citizens BancShares at a $16.5 billion discount, which received an extraordinary credit line from the Federal Deposit Insurance Corporation to compensate for potential future losses.

Oil prices also increased by 5% on March 27 after Russian President Vladimir Putin escalated geopolitical tensions in Europe. As reported by Investing.com, Russia plans to station tactical nuclear weapons in neighboring Belarus, in a move designed to intimidate opposing countries over their support for Ukraine.

Further tension from the crypto industry arose after a U.S. Federal Judge decided to temporarily halt the proposed sale of Voyager Digital to Binance.US. on March 27. Judge Jennifer Rearden of the U.S. District Court in New York granted the request for an emergency stay.

Let’s examine Bitcoin derivatives metrics to determine the current market position of professional traders.

Bitcoin futures show no impact from the CFTC–Binance case

Bitcoin quarterly futures are popular among whales and arbitrage desks, which typically trade at a slight premium to spot markets, indicating that sellers are asking for more money to delay settlement for a longer period.

As a result, futures contracts on healthy markets should trade at a 5%–10% annualized premium — a situation known as contango, which is not unique to crypto markets.

*Bitcoin 2-month futures annualized premium. Source: Laevitas*

The Binance news had no effect on the Bitcoin futures premium, despite the fact that the exchange holds 33% of the $11.2 billion open interest. The two-month contract premium is 3.5%, which is less than the neutral 5% threshold. Had there been some panic selling using leverage futures contracts, the indicator would have quickly moved to zero or even negative.

The absence of demand for leverage longs does not necessarily imply a price decline. As a result, traders should investigate Bitcoin’s options markets to learn how whales and market makers value the likelihood of future price movements.

Bitcoin options traders remain slightly optimistic

The 25% delta skew is a telling sign showing when market makers and arbitrage desks are overcharging for upside or downside protection. In bear markets, options investors give higher odds for a price dump, causing the skew indicator to rise above 8%. On the other hand, bullish markets tend to drive the skew metric below -8%, meaning the bearish put options are in less demand.

*Bitcoin 60-day options 25% delta skew: Source: Laevitas*

The 25% skew ratio stands at -5, indicating that the protective put options are trading at a slight discount, confirming the Binance news’ irrelevance. More importantly, the CFTC action had no effect on the 25% skew, so whales and market markets are not pricing in any meaningful market structure change.

What doesn’t kill you makes you stronger

The fact that derivatives indicators were barely impacted could be the “remote misses” effect, as analysis and pundits evaluate the odds of Binance and CZ getting anything more than a million-dollar fine and some term of conduct adjustment.

This type of psychological distortion was first observed in London during World War II when survivors who did not face imminent losses became even more confident and less likely to feel traumatized.

It appears unlikely that the market will price in higher odds of extreme volatility until those whales and arbitrage desks face more than a 3.5% price correction.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

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

Bitcoin corrects on Fed rate hike, but bulls are prepared for Friday’s $1.2B options expiry

BTC price dropped as the Fed rolled out a 0.25% rate hike, but improving housing market data and Bitcoin options data suggests that bulls are ready for this week’s expiry.

Bitcoin’s (BTC) 17.5% rally between March 16 and 22 surprised options traders betting on price levels below $26,000. The movement resulted from investors seeking protection against persistent inflation and the ongoing banking crisis .

Bitcoin bulls have been paying close attention to the negative effects of near-zero interest rates between April 2020 and April 2022, and some have used the information to profit from the $1.2 billion in BTC options that are set to expire on March 24.

Resilient inflation and improving housing markets

According to the official Consumer Price Index (CPI) released on March 22, Inflation in England unexpectedly increased to 10.4% in February due to higher food prices. This outcome is likely to prompt the Bank of England to raise interest rates on March 23, thereby increasing the likelihood of a recession. A higher cost of capital is detrimental to businesses and families, but it is the only way to stem the rise in consumer prices.

Meanwhile, existing home sales in the United States increased 14.5% in February, following the first annual price decline in over a decade. The numbers released on March 21 reflect the decrease in mortgage rates resulting from the increased demand for government bonds. In addition, the increase in sales suggests that the housing market has reached a price floor.

Investors frantically sought protection against monetary debasement as governments were forced to inject capital to prevent banking sector contagion. For example, the yield on five-year U.S. Treasurys decreased from 4.34% on March 8 to 3.6% on March 22, indicating increased demand for fixed-income instruments.

Is the new world one where the prices of all assets are rising?

Consumer prices continue to rise even as the S&P 500 reclaimed the 4,000 mark. Housing market demand is increasing, and gold gained 7.8% in 2023. Every asset with a chance to profit from inflation is increasing, a typical sign of fiat currency debasement.

The movement is not consistent with the macroeconomic scenario in which banks required emergency bailouts and major corporations were forced to lay off thousands of employees due to declining sales prospects. Therefore, a portion of Bitcoin’s recent gains toward $28,000 is due to the weakening U.S. dollar.

If the fear of a recession continues to have a negative impact on risk markets, Bitcoin may struggle to maintain the price levels necessary for bulls to earn $380 million or more by March 24 when weekly options expire.

Data also shows that bears were caught by surprise as Bitcoin surpassed $26,000

The weekly BTC options expiry has $1.2 billion in open interest, but the actual figure will be lower because bears have concentrated their bets on Bitcoin trading below $26,000.

*Bitcoin options aggregate open interest for March 24. Source: CoinGlass*

The 1.17 call-to-put ratio reflects the difference in open interest between the $675 million call (buy) options and the $575 million put (sell) options. Bears were caught off guard on March 17 when Bitcoin’s price surged above $26,000, so the likely outcome will be much lower than anticipated.

For instance, if Bitcoin’s price remains near $27,700 on March 24 at 8:00 am UTC, there will be only $21 million in put (sell) options. This distinction arises due to the fact that the right to sell Bitcoin at $26,000 or $27,000 is null if BTC trades above that price on the expiry date.

The most likely outcomes favor bulls by a wide margin

Below are the four most likely scenarios based on the current price action. The number of options contracts available on March 24 for call (buy) and put (sell) instruments varies depending on the expiry price. The imbalance favoring each side constitutes the theoretical profit:

Between $25,000 and $26,000: 7,400 calls vs. 5,500 puts. The net result favors the call (buy) instruments by $50 million.
Between $26,000 and $27,000: 9,100 calls vs. 3,700 puts. The net result favors the call instruments by $140 million.
Between $27,000 and $28,000: 12,700 calls vs. 800 puts. Bulls increase their advantage to $330 million.
Between $28,000 and $29,000: 14,300 calls vs. 20 puts. Bulls’ advantage increases to $405 million.

Bears can only reduce their losses, so they are likely to throw in the towel and concentrate on the $3.8 billion monthly expiry on March 31. However, based on the weekly options data, bulls are in a great position to profit at least $330 million.

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

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

$920B is the number to watch now that crypto’s trillion dollar total market cap is gone

The crypto market is taking a walloping, and there are three important reasons why BTC’s $380 billion valuation is a key support for the entire market.

Big round numbers always pique the interest of investors and the $1 trillion total crypto market capitalization is no exception. It’s a level that held for 48 days before collapsing on March 9. After a 16-hour negative 8.6% price movement, the indicator fell to $914 billion, its lowest level since Jan.13.

*Total crypto market cap in USD, 1-day. Source: TradingView*

Concerns about the stability of the U.S. banking industry, specifically the downfall and subsequent closure of Silvergate Bank (SI) on March 8 and the shut down of Silicon Valley Bank (SVB) on March 10 by The California Department of Financial Protection and Innovation, are among the reasons for breaking below the $1 trillion capitalization support. Silvergate was a critical fiat gateway network for the most important cryptocurrency exchanges and intermediaries.

The California Department of Financial Protection and Innovation did not provide an explanation for SVB Bank’s closure. Nonetheless, it stated that the financial institution will be the first FDIC-insured institution to fail in 2023.

Silicon Valley Bank possessed more than $200 billion in assets and provided financial services to a number of crypto-focused venture firms, including Andreessen Horowitz and Sequoia Capital.

Don’t forget, however, the ongoing efforts of the U.S. Federal Reserve to curb inflation, which include increasing interest rates above 2% in August 2022 and reducing its balance sheet through asset sales. In addition to this, U.S. labor market data released on March 10 revealed the creation of 311,000 jobs in February 2023, supporting the notion that the Fed’s anti-stimulus measures require additional firepower.

The unexpected result of the central bank’s cautious stance is a greater likelihood of a longer and more severe economic downturn. Investors demanded a higher return for two-year treasury notes versus longer-term dated bonds, causing the inverted bond curve to reach its highest level in 40 years.

What is the significance of the $920 billion market capitalization?

A notable bounce occurred as total crypto capitalization reached $920 billion, indicating large buyers around that level, which may appear insignificant at first but is critical for Bitcoin (BTC), the leading cryptocurrency. To begin, one must understand that Bitcoin accounts for roughly half of total crypto capitalization when stablecoins are excluded.

As a result, Bitcoin’s $380 billion market capitalization serves as the foundation for the $920 billion total. Three reasons explain why such a level is critical from a valuation standpoint.

Bitcoin is still a top-20 global tradable asset, valued at over $380 billion, ahead of the giant retailer Walmart (WMT), international payment processor Mastercard (MA), and the highly profitable consumer discretionary Procter & Gamble (PG). It becomes more difficult to attribute failure after such a remarkable accomplishment.

Despite Bitcoin’s 50% decline in 12 months to $19,650, its performance is comparable to that of billion-dollar companies such as Credit Suisse Group (CS) down by 63%, First Republic Bank (FRC) 51%, Warner Bros. (WBD) 43%, and Intel Corporation (INTC) 43%.

Lastly, by maintaining its $380 billion capitalization, it remains the seventh largest global base money when compared to fiat currencies. For example, the Australian Dollar (AUD) has a monetary supply of $378 billion, while the Canadian Dollar (CAD) has a monetary supply of $220 billion. The Indian Rupee, with a monetary base of $500 billion, is the next potential target.

At the moment, the options put/call ratio is stable

Traders can gauge the market’s overall sentiment by measuring whether more activity is going through call (buy) options or put (sell) options. Generally speaking, call options are used for bullish strategies, whereas put options are for bearish ones.

A put-to-call ratio of 0.70 indicates that put option open interest lags behind the more call options and is therefore bullish. In contrast, a 1.40 indicator favors put options, which is a bearish sign.

*BTC options volume put-to-call ratio. Source: laevitas.ch*

Since March 8th, protective puts have been in greater demand, indicating derivatives traders’ risk aversion. Aside from a brief overshoot on March 9 when the put-to-call ratio jumped above 1.50, nothing was out of the ordinary as the movement coincided with the Bitcoin price falling below $22,000.

The gap favoring the put options risk metric had been narrowing, indicating that even professional traders were finding themselves shorthanded as the crypto market continued to fall to new lows.

More importantly, the Bitcoin options market shows no signs of stress, which is encouraging given the immense pressure from the banking sector and the prospects of a dwindling economy.

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

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.