New Capital Continues To Enter While The Fight Between Bears And Bulls Is Disputed Options Contracts Expiration

Rubikkav
4 min readFeb 23, 2023

This time: For the first time since April 2022, money tickets in Bitcoin and Ethereum prevail over the departures; and On February 24, USD 1,900 million in BTC options expire, and the bulls are well positioned to benefit despite the Federal Reserve intention to cool the US economy.

New Capital Means Opportunity

Currently, money tickets are prevailing over the outputs in the main cryptocurrencies of the market: Bitcoin (BTC), Etherum (ETH) and stablecoins. This is something that happens for the first time since April 2022.

As seen in red in the graph, the capital exits prevailed significantly in the market of these cryptocurrencies from May 2022 to the beginning of 2023. And since then the incoming capital flow again exceeded, according to Glassnode data.

According to these records, since this trend was recovered the last month, USD 4.5 billion have entered to Bitcoin, Etherum and Stablecoins market. This is how it can be seen in green in the graph.

This unusual incoming volume occurs while Bitcoin price increased 43% so far from 2023 and Etherum rose 36%, according to CoinmarketCap data. This shows a difference with respect to the period in which capital outputs prevailed, when the prices of these cryptocurrencies stepped on minimums that did not see since 2020.

In any case, it should be noted that the capital tickets that are seen in the market are currently at low levels compared to previous moments. As seen in the graph, in May 2022 they were more than double than those now and in the 2021 upward cycle they reached around the USD 90,000 million.

Bears Did Not Expect Bitcoin To Remain

The open interest for the monthly expiration of options on February 24 is USD 1,910 million, but the real figure will be lower, as bassists waited for prices below USD 23,000. However, these operators were surprised, as Bitcoin won 13.5% between February 15 and 16.

The 1.55 proportion between purchase and sale options reflects the imbalance between USD 1,160 million in open interest in purchase options and USD 750 million in sale options. If the price of Bitcoin remains close to USD 24,000 at 8:00 AM UTC of February 24, only USD 125 million of these options sale (bassist) will be available. This difference occurs because the right to sell Bitcoin at 22,000 or $ 23,000 is useless if BTC quotes above that level at maturity.

Bulls Hope To have Good Profits

Below are the four most likely scenarios based on the current evolution of prices. Number of options available on February 17 for purchasing instruments (bullish) and sales (bassist) varies depending on the expiration price. The imbalance that favors on each side constitutes the theoretical benefit:

Between 22,500 and $ 23,000: 12,500 purchase options compared to 10,700 sales options. The net result favors purchase instruments (bullies) in USD 40 million.
Between $ 23,000 and $ 24,000: 16,200 purchase options compared to 7,600 sales options. The net result favors purchase instruments (bullies) in USD 200 million.

Between 24,000 and $ 24,500: 21,100 purchase options compared to 5,200 sales options. Alcistas increase their advantage to USD 385 million.
Between $ 24,500 and $ 25,000: 23,200 purchase options compared to 3,600 sales options. Bulls dominate when benefiting from USD 480 million.
This gross estimate considers the purchase options used in bullish bets and sales options exclusively in operations between neutral and bassists. Even so, this excessive simplification does not take into account more complex investment strategies.

For example, a trader could have sold a purchase option, then obtaining a reverse exhibition to Bitcoin above a specific price, but unfortunately there is no easy way to estimate this effect.

Fed Strictest Policy

Alcistas must exceed USD 24,500 on February 24 to ensure a potential benefit of USD 480 million. On the other hand, at best, bassists need the price to fall 3.5% below USD 23,000 to minimize their losses.

Taking into account the negative pressure of the desire of the Fed to weaken the economy and contain inflation, bassists are good for improving their situation and paying off with a loss of USD 40 million on February 24.

This movement may not be successful, but it is the only way to get rid of multimillionaire losses at the monthly expiration of the BTC options.

Looking at a broader temporal framework, investors continue to believe that the Fed is destined to reverse current monetary policy in the second half of 2023; Possibly racing the way for a sustainable rebound before the reduction in half of the Bitcoin block reward in April 2024.

Source:

  1. https://www.criptonoticias.com/mercados/regresan-usd-4-mil-millones-mercado-bitcoin-meses-salidas-capital/
  2. https://es.cointelegraph.com/news/bitcoin-bears-attempt-to-pin-btc-price-under-23k-ahead-of-this-month-s-options-expiry?utm_source=Telegram&utm_medium=social

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