Bitcoin (BTC) saw a significant drop below $19,000 on Sept. 6, marking its lowest level in 80 days. This decline not only wiped out the entire 32% gains made between July and mid-August but also resulted in the liquidation of $246 million worth of leveraged long (buy) futures contracts.
While Bitcoin’s price has decreased this year, it’s essential to compare its performance with other assets. For instance, oil prices have dropped by 23.5% since July, Palantir Technologies (PLTR) experienced a 36.4% decline in 30 days, and Moderna (MRNA) saw a 30.4% decrease in the same period.
Investors are moving away from riskier assets like Bitcoin due to inflationary concerns and fears of a global economic downturn, opting instead for safer positions such as cash, especially in the US dollar. Consequently, the 5-year yield on U.S. Treasuries has climbed to 3.38%, approaching its highest level in 15 years. This increase indicates a lack of confidence in current inflation control measures as investors demand higher returns to hold government debt.
Recent data revealed that China’s exports grew by 7.1% in August, following an 18% increase in July. Conversely, Germany reported a significant 13.6% drop in industrial orders in July compared to the previous year. Until there is a detachment from traditional financial markets, the likelihood of a sustained Bitcoin price rally remains low.
Bears Were Overly Confident
The open interest for the Sept. 9 options expiration stands at $410 million; however, this amount is expected to decrease as bears were overly optimistic. These traders had set their sights on Bitcoin falling below $18,700, with targets below $18,500.
The current 0.77 call-to-put ratio shows a significant imbalance between the $180 million buy options and the $230 million sell options. With Bitcoin hovering near $18,900, many of these bets are likely to end up worthless for both parties.
If Bitcoin remains below $20,000 by 8:00 am UTC on Sept. 9, only $13 million worth of buy options will remain, rendering them worthless, given the price condition at expiration.
Bears Target $18,000 for Profit
Based on the present price action, several scenarios have been outlined regarding available options contracts on Sept. 9 for both bullish and bearish instruments. The prevailing imbalance determines the potential profit for each side as follows:
- Between $17,000 and $18,000: No buy options, 4,300 sell options. Bears profit $130 million in this range.
- Between $18,000 and $19,000: No buy options, 5,050 sell options. Bears stand to gain $90 million in this bracket.
- Between $19,000 and $20,000: 700 buy options, 1,900 sell options. The bearish instruments have a $50 million advantage here.
- Between $20,000 and $21,000: 2,050 buy options, 2,200 sell options. Bulls and bears are evenly positioned in this range.
This estimation simplifies the analysis by focusing on put options in bearish strategies and call options in neutral to bullish positions. However, complex investment tactics are not accounted for in this straightforward illustration.
For instance, a trader might have sold a put option to gain exposure to Bitcoin above a specific price, but quantifying this impact accurately is challenging.
Bulls Face a Deadline on Sept. 9
Bitcoin bulls need to drive the price above $20,000 by Sept. 9 to prevent a potential $130 million loss. Conversely, bears’ best-case scenario requires a slight dip below $18,000 to maximize their profits.
Following the recent liquidation of $246 million in leveraged long positions over two days, Bitcoin bulls might have reduced margin to push the price higher. Therefore, bears hold an advantage in pushing Bitcoin below $19,000 ahead of the weekly options expiration.
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