Bitcoin derivatives metrics favor a move to $48K, but only after a lower support retest

Bitcoin (BTC), which saw an 11% increase in the last week, after the $46,000 resistance broke after 82 days. Many crypto pundits believe that Terraform Labs CEO Do Kwon played a significant role in the price movement, but this is still to be confirmed.

After a $139million purchase on March 29, a Bitcoin address believed to be Terra has amassed nearly $1.5 billion in BTC. TerraUSD (UST), an algorithmic stabilitycoin, aims at acquiring up to $10 billion in BTC to support its “dollar” reserve.

There have been mixed emotions on the macroeconomic side. The Consumer Price Index in the United Kingdom increased 6.2% year-on–year, which is higher than the 5.9% consensus. In the United States, however, the opposite happened as durable goods orders saw a 2.2% decline.

Current U.S. inflation is at its highest level in 40 years. Interest rates close to zero create a bullish climate for rare assets such as Bitcoin.

Bitcoin is less expensive than hard assets

The S&P 500 is only 4.4% below its 4,819 record high. It should not be surprising that Bitcoin has been so strong. The call (buy) option expiry on April 1 saw bulls emerge stronger than bears, while bears were surprised when Bitcoin prices stabilized at $47,000 on March 30, after which time the S&P 500 was 4% lower.

Bitcoin options open interest aggregated for April 1. Source: CoinGlass

The call-to-put ratio gives a wider view of Bitcoin bulls. This is because the $605million call (buy) instruments have more open interest than the $435million put (sell). The 1.39 call-to put indicator is misleading because most bearish wagers will be worthless.

If Bitcoin’s price is above $47,000 by 8:00 UTC on April 1, then only $80 million worth (put) options will be available. This is because Bitcoin’s right to sell at $45,000 has no value if it’s trading higher than that level.

Bitcoin bulls are aiming for a profit of $385 million

Based on current price action, here are the three most probable scenarios. The expiry price determines the number of options contracts that will be available for bulls (call) or bears (put) instruments on April 1. The theoretical profit is the result of an imbalance in favor of each side.

Between $44,000 to $46,000: 3,000 calls against 2,650 puts. The net result favors the bull call (bull) instrument. Between $46,000 and $48,000, 7,900 calls vs. 1,700 put. Bulls are favored by $290 million. Between $48,000 and $49,000, 9,350 calls vs. 1,300 put. The net result favors bull instruments by $385million.

This rough estimate includes the bullish options and neutral-to bearish options. This oversimplification ignores complex investment strategies.

A trader might have sold a call option to gain negative exposure to Bitcoin above a certain price. This effect is difficult to quantify.

To make a profit of $385 million, bitcoin bulls will need a pump that is at least $48,000. To reduce their loss to $120million, the best-case scenario would require a 3% drop in price from $47,200.

According to Coinglass data, Bitcoin bears had $580million in short positions liquidated between February 26 and March 30. Bulls should show their strength and keep Bitcoin prices above $47,000 going into April’s expiry.

Risk is inherent in every investment or trading move. Before making any investment or trading move, you should do your research.