The market for Bitcoin and other cryptocurrencies was taken aback by news this week that CBOE, the world’s largest options exchange operator, was set to launch trading in Bitcoin options with the intention of making these contracts available to institutional investors.
The price of the world’s most valuable cryptocurrency has seen a meteoric rise over recent months, jumping from less than $1000 at the beginning of the year to a record $6,500 on Tuesday. The last few weeks have seen a three fold increase in the total value of XMR’s outstanding contracts to $625 million and it could hit the $40,000 barrier this weekend. This would be an incredible achievement for one of the most volatile and controversial assets in existence.
Bitcoin is trading over the $40,000 mark for the first time ever as speculators rush to buy up the digital currency ahead of what is expected to be one of the busiest days of the year for options trading.
Despite recent breaks to the $40,000 mark, the price of Bitcoin (BTC) may continue to fall in August. The 42 percent rise in late July sparked several bullish short-term options wagers, although early data supports neutral-to-bullish call options, and inability to maintain $40,000 has substantially diminished this advantage.
The infrastructure plan in the United States Senate is likely to be a major source of pressure. HR 3684 tightens regulations for companies dealing in cryptocurrencies and increases reporting requirements for brokers, which has slowed the market’s upward trend. Along with tighter rules for crypto-related companies, supporters of the law estimate that increasing taxes on digital asset transactions would bring in an additional $28 billion in revenue.
Following weeks of debate between Republicans and Democrats, these unexpected measures were added to the deal on July 28, and another bearish factor emerged on July 27 when Micheal Hsu, the Acting Comptroller of the Currency, announced that regulators are investigating the commercial paper reserves backing Tether (USDT).
Bitcoin options open interest as of August 6th. Bybt is the source.
The $625 million Bitcoin options expiration on Friday has $400 million in neutral-to-bullish call options versus $225 million in defensive puts. Despite the fact that the first research indicates a significant disparity, 70% of the call options have been priced at $39,000 or more.
If the expiration price is over $40,000, the bulls may increase their advantage to $162 million.
If Bitcoin’s price remains below $39,000, just $120 million in call options will expire on Friday. On the other side, $35 million of the neutral-to-bearish put options will be traded, giving the bulls a $85 million edge.
If Bitcoin trades over $39,000 by the expiration date on August 6, the difference rises to $110 million. If bulls band together to drive the market over $40,000, though, call options will outstrip defensive puts by $162 million.
This bullish Bitcoin options strategy aims for $50K without the danger of being liquidated.
Surprises are still possible, but bulls have the upper hand.
Bitcoin’s volatility provides opportunity for surprises, even though the options expire in less than 17 hours. Bulls are the most powerful force at work, and they are likely to use it to keep prices over $38,000.
Given that the warnings from the US Senate and the Tether probe are unlikely to yield fruit in the near future, the bears’ chances of making a return are low.
Bulls would most likely utilize their gains after the expiration to build positions over the following weeks, bolstering the present $37,500 support.
The author’s thoughts and opinions are entirely his or her own and do not necessarily represent those of Cointelegraph. Every investing and trading decision has some level of risk. When making a choice, you should do your own research.
The bears in the market are playing catch-up on bitcoin after the cryptocurrency blew past $40,000 on Wednesday. While bitcoin was trading well above the $40,000 mark, the main cryptocurrency had a tight rally on Wednesday, which prompted traders to buy more. On Friday, bitcoin is set to expire, which means 60,000 bitcoin options contracts are set to expire and buyers will be able to exercise their options, sending the price of bitcoin up.. Read more about bitcoin breakout and let us know what you think.
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