A prediction of Bitcoin (BTC) hitting $80,000 by the end of the year might have seemed plausible earlier in the year when BTC surged to $48,000 in March. However, this optimism was quickly dashed as a swift 25% increase over two weeks led to a peak of $48,220 on March 28, followed by a harsh bear market.
It is worth noting that the events in the U.S. stock market likely influenced these happenings. The S&P 500 index hit a peak of 4,631 on March 29 but then plummeted by 21% to 3,640 by mid-June.
These events coincided with significant occurrences such as the suspension of withdrawals by cryptocurrency lender Celsius on June 12 and the insolvency of venture capital firm 3 Arrows Capital (3AC) on June 15.
While concerns about an economic downturn undoubtedly triggered the cryptocurrency bear market, mismanagement by centralized billion-dollar entities exacerbated the situation, leading to liquidations and further price drops.
Several incidents contributed to this, including the collapse of TerraUSD/Luna in mid-May, the struggles of crypto lender Voyager Digital in early July, and the bankruptcy of FTX/Alameda Research, the second largest exchange and market maker, in mid-November.
Unexpected victims of this series of events included publicly-listed mining companies like Core Scientific, which had to file for Chapter 11 bankruptcy on Dec. 21. Despite efforts by the bulls, Bitcoin has not managed to close above $18,000 since Nov. 9.
Given this background, the $2.47 billion Bitcoin year-end options expiry is expected to favor bears, even though bullish bets outnumber bearish ones significantly.
Most Bullish Bets Aiming for $20,000 or Higher
In early November, Bitcoin dropped below $20,000 coinciding with the collapse of FTX, surprising year-end option traders.
Only 18% of the call options for the monthly expiry were placed below $20,000, favoring bears who had fewer bets positioned below this level.
Despite the overall call-to-put ratio of 1.61 favoring bullish bets, with the call open interest at $1.52 billion compared to $950 million for put options, the downward trend in Bitcoin since November has rendered most bullish bets potentially worthless.
If Bitcoin continues to trade below $17,000 at 8:00 am UTC on Dec. 30, only $33 million worth of these call options will have any value.
Bears Could Gain a $340 Million Profit
Based on the current price action, several scenarios have been outlined with the number of options contracts available on Dec. 30 for call and put instruments, showing a theoretical profit imbalance:
- Between $15,000 and $16,000: 700 calls vs. 22,500 puts. Bears have a net profit of $340 million.
- Between $16,000 and $17,000: 2,000 calls vs. 16,500 puts. Bears have a net profit of $240 million.
- Between $17,000 and $18,000: 7,500 calls vs. 13,600 puts. Bears stand to profit $110 million.
- Between $18,000 and $19,000: 12,100 calls vs. 11,300 puts. The result is balanced between bulls and bears.
These estimates consider call options in bullish bets and put options in neutral-to-bearish trades. However, this oversimplification overlooks more intricate investment strategies.
Bitcoin bulls need to push the price above $18,000 on Dec. 30 to prevent a potential $340 million loss. Yet, achieving this seems challenging amid regulatory pressures in the U.S. and fears of insolvency in major exchanges, despite recent efforts to provide proof of reserves.
Given these circumstances, the most likely outcome for the Dec. 30 expiry is a range of $15,000 to $17,000, favoring a win for bears.
The views, thoughts, and opinions expressed in this article are those of the author and do not necessarily reflect the views and opinions of Cointelegraph.
Image Source: Momentum studio / Shutterstock
