The Price of Bitcoin Drops Below $30K but Traders are Still Bullish: Know More

  • January 28, 2021
  • Jennifer Moore

The price of Bitcoin dropped approximately 10% today in order to test $30,000 support. This declination is described by the traders as key support happening just 2 days ahead concerning this month’s options and futures expiry. Apart from the record-high amount of 4 billion dollar options expiry remaining only two days away, both the bull and bear markets happened to trade similar sizes. 

Segments of Options

Unlike the futures contracts, options happen to be divided into two segments namely the call options and the put options. The call options, also known as the buy options, enable the buyer to obtain Bitcoin on the expiry date at a fixed price. 

On the contrary, the instrument’s seller will be required to make the Bitcoin sale. On the usual note, they are utilized on both bullish strategies and neutral arbitrage trades. On the other hand, the put options, also known as the sell options, are usually used as hedge protection as compared to negative price swings. 

Also Read: The $3.7 Billion in Bitcoin Options Expires on January 29 with the Growing Interest in Cryptocurrencies

Understanding the Balance of these Competing Forces

To understand how the competing forces happen to be balanced, one needs to compare the put and call options size at every expiry price, also known as a strike. The market as options happens to be all or none. It indicates that they are either become worthless or have value if trading happens above the call strike price, otherwise the opposite happens for the put option holders. 

Past 24-Hour Trading Volume

As far as the last 24 hours trading volume is concerned, it has favored the call options that were more bullish by 51%. Moreover, this amount happens to be polluted by the ultra bullish strikes that are priced at $37000 and more. 

Considering only less than 36 hours left before the expiry of options, these contracts happen to be trading below $50 each. Apart from this, the trading amount of today added another 95 million dollars worth of call options with an open interest below 35000 dollars excluding these over-optimistic strikes. On the contrary, the more there are the put options happened to be at $27000, the higher the amount of 90 million dollars worth of open interest. Today’s activity resulted in being neutral concerning the options expiry of Friday. Nonetheless, one needs to evaluate the imbalance of the overall open interest apart from the movement of today. 

Also Read: Bitcoin’s Price Could Rise $45K Due To Institutional Investment. What Happens When They Sell?

Estimating the Potential Impact of Fridays Expiry

By overlooking the put options below $27000 along with the call options above $35,000, one can easily estimate the possible impact of Friday’s options expiry. On the other hand, incentives to change the price higher than 16% turn out to be less likely while the potential gains are likely to seldom surpass the price. This information leaves $582 million worth of call options approximately up to $35,000 concerning the aggregate expiry of options on 29th January. 

In the meantime, the bearish put options decline below $27,000 amounting to 422 million dollars. Thus, there happens to be a 160 million dollar imbalance highlighting the bullish call options. As far as the trading volumes in the past 24 hours are considered, thereby concerning the put options open interest, there is not much to gain for the bear market in pressure in Bitcoin below $29,000 as far as the options market standpoint is concerned. 

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