Bitcoin options data shows whales are betting big. Will we see $50,000 BTC in January?

Bitcoin (BTC) options open interest hit an unprecedented milestone on December 7, surging to a staggering $20.5 billion. This impressive performance means that institutional investors are actively participating in the cryptocurrency space. Unlike futures contracts, BTC options come with a pre-determined expiration price, providing valuable insight into trader expectations and market sentiment.

At the forefront of the Bitcoin options market is Deribit, which boasts an impressive 90% market share. The exchange currently has a significant $2.05 billion in open interest for options expiring on January 26. However, it is worth noting that many of these bets may lose value as the deadline approaches.

Nonetheless, with the prospect of cash exchange-traded funds (ETFs) receiving regulatory approval, previously neglected bullish bets are re-entering the market.

How much does a Bitcoin call (buy) option cost?

Currently, the $54,000 call option scheduled to expire on January 26th is trading for 0.02 BTC, which is equivalent to $880 at the current market price. This option requires the value of Bitcoin to increase by 25% over the next 49 days for the buyer to make a profit. It is worth noting that sellers can hedge their positions using BTC futures while pocketing the option premium, mitigating some of the perceived risks associated with this trade.

Analysts highlighted the significance of the $250 million open interest arising from Deribit’s $50,000 call option. At the current price of $44,000, these options are worth a total of $8.8 million. This value could experience significant growth if regulators approve the spot ETF plan. However, it is still unclear whether buyers of these $50,000 call options will use them for a bullish strategy.

The relatively low demand for calls in the $70,000 to $80,000 range, which accounts for less than 20% of open interest, suggests a lack of energy among bulls. With exposure of $285 million, this option is currently worth only $1.2 million. By comparison, open interest for the $60,000 and $65,000 call options scheduled to expire on December 29 stands at $250 million.

Looking at put options, traders appear to have taken positions cautiously for the January expiration date, with 97% of bets placed below $42,000. Unless there is a significant reversal in the current price trajectory, the $568 million in open interest in put options could face a bleak outlook. Nonetheless, while selling put options can provide traders with a means to gain positive exposure to Bitcoin above a certain price level, estimating the exact impact remains difficult.

Related: SEC Discusses ‘Key Technical Details’ with Spot Cryptocurrency ETF Applicants – Report

Bitcoin put options should not be ignored (yet).

Open interest in call options on January 26 was 2.6 times higher than open interest in put options on Deribit, signaling greater demand for neutral-to-bullish strategies. The appeal of the $50,000 call option is undeniable and has the potential to push the price of Bitcoin higher, but keep in mind that the expiration price will only be determined at 8:00 UTC on January 26th, so it is too early to put significant effort into it. It’s important to do this. step.

In the case of a Bitcoin downtrend, the ideal scenario would depend on the ETF proposal being rejected. However, the SEC may request additional time to reach a final decision, especially given the many recent amendments to the filing. Industry experts, including Bloomberg’s senior ETF analyst, currently estimate a 90% chance of approval in 2024, which is expected to extend beyond January.

With 49 days left until expiration on January 26, it seems unreasonable to hastily discard 97% of put options as worthless. Additionally, the trial involving Binance and its founder Changzeng Zhao has just begun, so the bears have a regulatory environment in place.