$10.1 Billion Bitcoin Options Expiry Looms: Will Bulls or Bears Prevail in Year-End Battle?

• Bulls have been said to have the upper hand as the Bitcoin market gets prepared for a $10.1 billion options expiry.

• Analysts explain four different outcomes that could happen under four scenarios by 8:00 am ET on December 29.

At exactly 8:00 am ET on December 29, a fierce battle for dominance between bulls and bears would be decided as the Bitcoin market gets ready for a $10.1 billion options expiry. According to data, crypto bulls could definitely seize control, however, bears could take the Bitcoin price to below $42k in a bid to minimize their losses. Analysts believe that both market participants have what it takes to influence Bitcoin’s spot price. However, the expiry price can be used to guess the outcome. 

According to the data, Deribit, a leading option market, has a $7.7 billion open interest with the Chicago Mercantile Exchange (CME) having $1.38 billion. OKX comes third with $630 million open interest. The bullish option is reported to have an edge due to the potential approval of the spot Bitcoin exchange-traded fund (ETF). According to Bloomberg’s James Seyffart, there is a 90 percent chance of a spot Bitcoin ETF approval before January 10, 2024.

Okay, we’re nearing in on deadline dates for 3 spot #Bitcoin ETF applications. I want to get ahead of it because there’s a pretty good chance we’ll see delay orders from the SEC. Delays WOULD NOT change anything about our views & 90% odds for 19b-4 approval by Jan 10, 2024.

Spot Bitcoin ETF Approval Imminent

Experts have observed that the approach of engagement by the US Securities and Exchange Commission with the ETF proponents has been changed. The Agency has resorted to engaging in dialogue with ETF creators instead of rejecting applications outrightly. This has increased the odds for approval, and suppressing the possibility of bears succeeding in sending the Bitcoin price to below $40k ahead of the Bitcoin option expiry.

Another likelihood of ETF approval has been linked with the evolving crypto environment towards compliance and Anti-Money Laundering practices. A typical example is the plea deal made by Binance with the US Justice Department. 

It is mentioned that $10.1 billion is the aggregate open interest for the December options expiry. However, the final amount could be less as bearish investors have been taken by surprise by the recent rally above $40k. It is important to note that Deribit and CME options have a combined open interest of $9 billion. Put (sell) options are said to be 32 percent while Call (buy) open interest is $5.4 billion. It is expected that $185 million worth of put (sell) options will be available when the Bitcoin price gets close to $43,100 at 8:00 am UTC on December 29. 

Four Scenarios Based on the Current Market Action

Analysts have also come up with four likely outcomes based on the current market behavior. Firstly, it is expected that there would be 3,000 calls vs. 17,700 puts when the price trades between $39,000 and $40,000. This implies that put (sell) instruments would be favored by $575 million. 

At a price between $40,000 and $42,000, there would be 13,800 calls vs. 11,600 puts. Call instruments would be favored by the net results by $90 million. 

Between $42,000 and $44,000, there would be 24,200 calls vs. 7,200 puts with a net result favoring the call instrument by $730 million. Lastly, there would be 27,900 calls vs. 1,800 puts when the price falls between $44,000 and $45,000. This means the net results would favor the call instrument by $1.15 billion. 

As of press time, Bitcoin (BTC) was trading at $42,404.48 after falling by 1.5% in the last 24 hours. The asset is also down by 3% in the last seven days with a bearish market sentiment.