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Bitcoin bulls aim to reach $25,000 BTC by Friday

 


It has now been 51 days since Bitcoin ( BTC ) last closed above $24,000. Even the most bullish traders are wondering if a sustained recovery is possible. Despite the weak price action, the bulls have the upper hand on Friday's $510 million BTC options expiry.

Investors have turned risk-averse as the Federal Reserve plans to hike interest rates and downsize its record $8.9 trillion balance sheet. The Bloomberg Commodity Index (BCOM), which measures the price development of crude oil, natural gas, gold, corn and lean pork, fell 9 percent over the same period.


Traders continue to seek protection in US bonds and cash as San Francisco Federal Reserve Bank Governor Mary Daly said on August 2 that the central bank 's fight against inflation was "far from over". However, the impact of monetary policy on inflation, employment and the global economy remains to be seen.


Bearish bets predominantly below $22,000

Bitcoin's rally above $22,000 on July 27 surprised the bears as only 28 percent of the August 5 put options were placed above that price level. Meanwhile, on July 30, bitcoin bulls were fooled by the rally to $24,500 with 59 percent of their bets above $25,000.


Looking at the call to put option ratio which stands at 1.60 shows more bullish bets as open interest in call options (buying) is $315 million and in put options (selling) is $195 million. However, with Bitcoin currently above $23,000, most bearish bets are likely to become worthless.


For example , if bitcoin price stays above $23,000 on August 5th, only $19 million of put options will be available. This is so worthless because the right to sell bitcoin for $22,000 or $20,000 makes no sense if it is above that level at expiry.


Bulls could make $200 million in profits

The four most likely scenarios based on the current price development are shown below. The number of option contracts available on August 5 for call and put options varies based on the expiry price. The difference that one side benefits from represents the theoretical gain:


Between $20,000 and $22,000: 100 calls versus 3,700 puts. In total, the Bears will win $75 million.

Between $22,000 and $24,000: 1,400 calls versus 1,600 puts. Overall, the buying and selling instruments are balanced.

Between $24,000 and $25,000: 3,800 calls versus 100 puts. Overall, the bulls make $90 million in profit.

Between $25,000 and $26,000: 0 calls versus 7,900 puts. Overall, the bulls make $200 million in profit.

This rough estimate takes into account the call options used on bullish bets and the put options used exclusively on neutral to bearish bets. However, this is a simplified representation. More complex investment strategies are ignored.


Bears have less leeway for bitcoin price decline

Bitcoin bulls need to push the price above $24,000 on Aug. 5 to lock in a $90 million profit. In the best-case scenario for the bears, they can sink the price below $22,000 for a $75 million profit.


However, on July 26-27, Bitcoin bears liquidated $140 million worth of leveraged short positions , according to Coinglass data . As a result, they have less leeway to pull the price down in the short term.


The most likely scenario is a tie. That would mean Bitcoin price would be hovering between $22,000 and $24,000 before the options expire on August 5.

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