Bitcoin retraces intraday gains as bears aim to pin BTC price under $18K

CoinTelegraph

On Dec. 14, Bitcoin (BTC) broke above $18,000 for the first time in 34 days, marking a 16.5% gain from the $15,500 low on Nov. 21. The move followed a 3% gain in the S&P 500 futures in 3 days, which reclaimed the critical 4,000 points support. 

Bitcoin/USD index (orange, left) vs. S&P 500 futures (right). Source: TradingView

While BTC price started the day in favor of bulls, investors anxiously awaited the U.S. Federal Reserve Committee’s decision on interest rates, along with Fed chair Jerome Powell’s remarks. The subsequent 0.50% hike and Powell’s explanation of why the Fed would stay the course of its current policy gave investors good reason to doubt that BTC price will hold its current gains leading into the $370 million options expiry on Dec. 16.

How To Get Free Crypto  

Analysts and traders expect some form of softening in the macroeconomic tightening movement. For those unfamiliar, the Federal Reserve has previously increased its balance sheet from $4.16 trillion in February 2020 to a staggering $8.9 trillion in February 2022.

Since that peak, the monetary authority has been trying to unload debt instruments and exchange-traded funds (ETFs), a process known as tapering. However, the previous five months resulted in less than $360 billion of assets decline.

Until there’s a clearer guide on the economic policies of the world’s largest economy, Bitcoin traders are likely to remain skeptical of a sustained price movement, regardless of the direction.

Bears placed most of their bets below $16,500

The open interest for the Dec. 16 options expiry is $370 million, but the actual figure will be lower since bears were caught off-guard after the move to $18,000 on Dec. 14. These traders completely missed the mark by placing bearish bets between $11,000 and $16,500, which seems unlikely given the market conditions.

Coinbase Banner  

Bitcoin options aggregate open interest for Dec. 16. Source: CoinGlass

The 0.94 call-to-put ratio shows a balance between the $180 million call (buy) open interest against the $190 million put (sell) options. Nevertheless, as Bitcoin stands near $18,000, most bearish bets will likely become worthless.

If Bitcoin remains above $18,000 at 8:00 am UTC on Dec. 16, virtually none of these put (sell) options will be available. This difference happens because a right to sell Bitcoin at $17,000 or $18,000 is worthless if BTC trades above that level on expiry.

Bulls can profit up to $155 million

Below are the four most likely scenarios based on the current price action. The number of Bitcoin options contracts available on Dec. 16 for call (bull) and put (bear) instruments varies, depending on the expiry price. The imbalance favoring each side constitutes the theoretical profit:

  • Between $16,500 and $17,500: 1,400 calls vs. 1,200 puts. The net result is balanced between calls and puts.
  • Between $17,500 and $18,000: 3,700 calls vs. 100 puts. The net result favors the call (bull) instruments by $60 million.
  • Between $18,000 and $19,000: 6,200 calls vs. 0 puts. The net result favors the call (bull) instruments by $115 million.
  • Between $19,000 and $19,500: 8,100 calls vs. 0 puts. The net result favors the call (bull) instruments by $155 million.

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

FreeBitcoin Banner  

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

FTX contagion continues to impact markets

During bear markets, it’s easier to negatively impact Bitcoin price due to the tone of newsflow and its outsized effect on the crypto market.

Recent negative crypto news includes reporting on a U.S. court filing that showed an “unfair” trading advantage for Alameda Research, the market-making and trading company associated with the bankrupt exchange FTX.

The U.S. Commodities Futures Trading Commission alleges that Alameda Research had faster trading execution times and an exemption from the exchange’s “auto-liquidation risk management process.”

Leading into Dec. 16, the bulls’ best-case scenario requires a pump above $19,000 to extend their gains to $155 million. This seems improbable considering the lingering regulatory and contagion risks. For now, bears will likely be able to pressure BTC below $18,000 and avoid a higher loss.

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.

Go to Source
Author: Marcel Pechman


Recommended Crypto Services, Products and Strategies:

The first thing any crypto investor needs is is a reliable and secure Crypto Wallet.  Whether you’re looking for an online wallet, hardware wallet, desktop or mobile wallet, Crypto Renegade provides you with all the Best Crypto Wallets in each category.

Best Crypto Wallets Banner

When you’re ready to buy more crypto, or exchange your coins for others, Crypto Renegade’s list of the Best Crypto Exchanges has you covered.  The Crypto Exchanges recommended here offer everything from simplicity and convenience to advanced trading platforms and profit sharing. 

Best Crypto Exchanges Banner

If you want to learn more about the methods and tools that can be used to find Great Crypto Projects, then be sure to check out Crypto Renegade’s strategy for How To Find The Best Cryptocurrency.

Crypto Strategy Banner

For those people that don’t have any money to invest right now, or just want to understand the technology a bit more, you’ll definitely want to check out Crypto Renegade’s Free Crypto Strategy and start collecting Free Coins today!

Free Crypto Banner

What do you think about cryptocurrency? Do you have any questions about it? Be sure to leave a comment below.

This site uses Akismet to reduce spam. Learn how your comment data is processed.