Bitcoin (BTC) has been trading in a descending blueprint since the strong $53,000 rejection that occurred on Sept. seven, and the $3.4-billion futures contracts liquidation along with China's ban on crypto trading appear to have severely impacted traders' morale.

Adding to the negative sentiment, major crypto exchanges such as Binance and Huobi halted some services in mainland China, and some of the largest Ethereum mining pools, like SparkPool and BeePool were forced to shut down completely.

Bitcoin price in USD at Coinbase. Source: TradingView

Based on the higher up chart, information technology is possible to empathise why buyers placed eighty% of their bets at $44,000 or college. Nonetheless, the past 2 weeks definitively caused those call (buy) options to lose value chop-chop.

On Sept. 25, the People'southward Bank of Red china posted a nationwide ban on crypto and barred companies from providing financial transactions and services to market participants. The news triggered an 8% dip in Bitcoin'southward cost along with a broader pullback on altcoins.

The bearish sentiment was confirmed after Tesla CEO Elon Musk had expressed his support for cryptocurrency at the Code Conference in California.

Musk said:

"It is not possible to, I call back, destroy crypto, but information technology is possible for governments to ho-hum downward its advocacy."

Had nosotros been in a neutral-to-bullish market, those remarks would likely take reversed the negative trend. For example, on July 21, Musk said that Bitcoin had already hitting its benchmark on renewable energy. Equally a result, Bitcoin's price, which had previously dropped 12% in ten days, reverted the motion and hiked 35% over the next 10 days.

The Oct. 1 expiry will be a strength test for bulls because whatsoever price below $42,000 ways a bloodbath with absolute dominance of put (sell) options.

Bitcoin options aggregate open interest for October. 1. Source: Bybt

Initially, the $285-1000000 neutral-to-bullish instruments dominated the weekly decease past 21% compared to the $320-million puts (sell) options.

However, the 1.21 call-to-put ratio is deceiving because the excessive optimism seen from bulls could wipe out nearly of their bets if Bitcoin's cost remains beneath $43,000 at 8:00 am UTC on Fri.

After all, what good is a right to acquire Bitcoin at $50,000 if it's trading below that cost?

Bears were too caught by surprise

66% of the put options, where the buyer holds a right to sell Bitcoin at a pre-established cost, has been placed at $42,000 or lower. These neutral-to-bearish instruments volition become worthless if Bitcoin trades above that price on Friday forenoon.

Below are the four likeliest scenarios that consider the electric current cost levels. The imbalance favoring either side represents the potential turn a profit from the death.

The information shows how many contracts will exist available on Friday, depending on the decease price.

  • Between $xl,000 and $41,000: 110 calls vs. 4,470 puts. The net result is $175 one thousand thousand favoring the protective put (conduct) instruments.
  • Between $41,000 and $43,000: 640 calls vs. 4,000 puts. The internet result continues to favor bears by $140 million.
  • Betwixt $43,000 and $45,000: one,780 calls vs. 2,070 puts. The net issue is counterbalanced between bears and bulls.
  • To a higher place $45,000: 2,530 calls vs. i,090 puts. The net result shifts in favor of bulls by $65 1000000.

This crude estimate considers call (buy) options used in bullish strategies and put (sell) options exclusively in neutral-to-bearish trades. Unfortunately, real life is not that simple because it's possible that more than complex investment strategies are beingness deployed.

For example, a trader could have sold a put option, effectively gaining a positive exposure to Bitcoin to a higher place a specific price. Consequently, there'due south no easy style to estimate this effect, so the simple analysis above is a good guess.

Every bit things currently stand, bears accept absolute control of the October. ane expiry, and they have a few good reasons to go along pressuring the price below $43,000.

Unless some unexpected buying force per unit area comes out over the side by side 12 hours, the amount of capital required for bulls to force the market above the $45,000 threshold seems immense and unjustified.

On the other hand, bears need a 5% negative price swing that takes BTC beneath $41,000 to increase their lead by $35 million. And then, this move also shows piffling return for the amount of effort required.

The bulls' but promise resides in some surprise positive newsflow for Bitcoin's price ahead of October. 1 at 8:00 am UTC. If whatever sensible activity is bound to occur, it will likely have identify during the weekend when there'south less active flow.

The views and opinions expressed hither are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading movement involves run a risk. You should conduct your own inquiry when making a decision.