For the past eight weeks, Bitcoin has been painting higher lows. However, it has not been able to break through the resistance at the $24,000 level. This is why the upcoming $475 million options expiration on August 12 could be a game changer for bulls.
Due to the increasing regulatory pressures, Cointelegraph advised investors to avoid taking on bullish positions. On July 21, the U.S. Securities and Exchange Commission charged a former Coinbase manager with illegal trading.
The collapse of the Terra-Luna ecosystem and the subsequent bankruptcy of 3AC, a venture capital firm, has affected the markets. One of the latest victims is Hodlnaut, a crypto lending platform. Users of the platform could not withdraw their funds on August 8.
Although most traders are holding back on their positions above the $24,000 mark, other factors such as the lack of confidence in the market and the liquidation of some of Elon Musk's assets could have affected their expectations. According to regulatory filings, Musk sold almost $7 billion worth of Tesla stock.
On August 8, Cathie Wood, the CEO of Ark Investment Management, explained that the 1.41 million Coinbase (COIN) shares sold by Ark in July were due to the uncertainty surrounding the exchange's business model.
Bulls have better positions
Despite the failure of Bitcoin to break below the $21,000 mark on July 27, bears were still surprised by the market's performance. However, since only 8 percent of the options on August 12 have been placed above the $23,000 strike, Bitcoin bulls are more likely to benefit from the upcoming options expiration.
The 1.23 call-to-put ratio suggests that Bitcoin bulls are more likely to take advantage of the upcoming options expiration. Although the open interest in the calls and puts is at $262 million and $212 million, most of the bears are likely to lose money if the market continues to trade above $23,000.
If Bitcoin's price reaches the $23,000 mark at 8:00 a.m. UTC on August 12, only $16 million of the options will be available. This is because the right to sell Bitcoin at that level is not used if the market continues to trade above the $23,000 mark on the day of the options expiration.
#Bitcoin correcting due to several reasons. 👇— Michaël van de Poppe (@CryptoMichNL) August 9, 2022
▫️ (Unwarranted) fears among CPI data tomorrow.
▫️ Resistance around $24.3K continuing being resistance.
Expecting to see a test around $23-23.2K to hold, so trend continues.
Another test of resistance -> break-out towards $28K. pic.twitter.com/hqcJ6Ry64c
Huge profit up for grabs
Based on the current price action and Cointelegraph's analysis, the most likely scenarios for bulls to make a profit are presented by calling between $21,000 and $22,000 where there are 4,200 puts, between $24,000 and $25,000 where there are 3,700 calls and 120 puts, which could put $90 million in the table.
Additionally, the call-to-put ratio suggests that the bulls are more likely to make money if Bitcoin prices reach the $25,000 and $26,000 levels. In these scenarios, buying calls leads to a net profit of $150 million.
The crude estimate used to calculate this figure assumes that the calls and puts are only used in neutral-to-bearish trades. Moreover, Cointelegraph claimed that this approach doesn't consider complex investment strategies and overstates the likelihood of profit.
Bitcoin bears need to close the gap between the current price and the August 12 low to avoid a potential loss of $150 million. However, since the liquidation of long futures positions on August 8 and 9 has reduced the odds of a higher price, the bulls are less inclined to push the market higher.
The most likely scenario is that Bitcoin prices reach the $23,000 to $24,700 range on August 12. This level will provide a balanced outcome between the bulls and the bears.