Even if the decision matches the market consensus, the post-meeting statement should be the primary area of focus for investors. The specific areas to focus on will be guides for the next meeting in March.
The worrying news of the largest stablecoin Tether (USDT) may also cause a meaningful impact after Celsius bankruptcy auditor report showed that “Tether exposure eventually increased to more than $2 billion” in September 2021. However, it is unclear if iFinex – the issuer of Tether – had suffered no losses. Paolo Arduino, chief technology officer of iFinex, denied exposure to Celsius, and suggested that the tester had “mixed up” prepositions in the report.
Is there a strong stock market correction coming?
Legendary portfolio manager Michael Perry, known for being one of the most vocal critics of the subprime mortgage crisis from 2007 to 2008, posted a short note on Twitter on February 1, suggesting that investors are “selling.”
While the letter lacks a supporting thesis, one can infer that Perry expects a meaningful correction in the traditional markets. Given the 40-day correlation between Bitcoin and the S&P 500 at 75%, the odds of a BTC price correction become apparent.
Thus, this week’s $1 billion worth of BTC options could expire on February 3 in either direction because bears can still turn the tables even though the current currently favors the bulls.
Bitcoin bears were caught completely off guard
Open interest for the February 3 options expiration is $1 billion, but the actual number would be lower since bears were caught off guard after surging 9.6% between January 20 and January 21.
Bitcoin options pool open interest on 3 february. Source: Coinglass
The AI crypto platform provided an average of 17 win alerts each month in 2022
The call-to-call ratio of 1.61 reflects the imbalance between the open interest of the call (buy) of $640 million and the put options (put) of $400 million.
If the Bitcoin price remains above $23,000 at 8:00 AM UTC on February 3, these put (put) options worth less than $7 million will be available. This difference occurs because the right to sell Bitcoin at $22,000 or $23,000 is useless if BTC trades above that level at expiration.
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$23,000 worth of bitcoin will give the bulls a profit of $180 million
Here are the three most likely scenarios based on the current price action. The number of option contracts available on February 3 for the buy (bull) and put (bear) instruments varies, depending on the expiration price. The imbalance in favor of each side constitutes the theoretical gain:
Between $21,000 and $22,000: 2,700 calls for 10,700 points. Net result favor puts (Bear) by $165 million.
Between $22,000 and $23,000: 4,400 calls for 4,200 points. The net result is a balance between buy and sell options.
Between $23,000 and $24,000: 7,800 calls for 100 puts. Net result favor buys (bull) by $180 million.
Between $24,000 and $25,000: 12,400 calls for zero. The bulls extend their winnings to $300 million.
This rough estimate takes into account buy options used in bullish bets and put options exclusively in neutral to bearish trades. However, this oversimplification ignores more complex investment strategies.
For example, a trader could have sold a call option, effectively gaining negative exposure to bitcoin above a certain price, but unfortunately, there is no easy way to estimate this effect.
Essentially, Bitcoin bears need to push the price below $22,000 on February 3 to turn the tables and secure a profit of $165 million. But, for now, the bulls are well positioned to take advantage of the BTC weekly options expiry and use the proceeds to defend the $23,000 support.