Dec. 4: A Day to Forget for Bitcoin Bulls

On December 4th, Bitcoin bulls found themselves nursing serious wounds after a dramatic nosedive from $57,000 to $42,000. This plunge managed to evaporate $850 million from long BTC futures contracts like sunscreen on a hot day. If that wasn’t enough to send shivers down the spines of crypto enthusiasts, the Fear and Greed index saw its lowest readings since July. Talk about a bad hair day!

Comparisons That Make You Go Hmmm

It’s a bit ironic to stack comparatives here. The July 21 dip, when Bitcoin dropped below $30,000, would have wiped out nearly all the impressive gains from 2021. Meanwhile, the recent descent to $42,000 still leaves us with a 44% bump in value year-to-date, which is a far cry from the S&P 500’s modest 21% or WTI oil’s decent 41% climb. Go big or go home, right?

Where Have All the Bitcoins Gone?

Current data indicates that Bitcoin reserves on exchanges are down to a three-year low, with less than 2.27 million BTC left on trading floors. It’s kind of like finding out your favorite bar ran out of beer—investors just aren’t ready to sell just yet. Fewer Bitcoins in circulation might hint at a bullish signal, as investors seem to be holding onto their precious coins like a kid with their Halloween candy stash.

The Options Market: A Tug-of-War

But despite the bullish signs, the options market is like a see-saw stuck in the middle. Last Friday’s $1.1 billion expiration showed a razor-thin advantage for call options, with the bulls barely holding 7% more open interest than the bears. That’s not very promising when considering the 11.5% dip over the past week that caused most bullish bets to go poof! Realistically, if Bitcoin stays under $52,000 come the December 10 deadline, we’re looking at only $50 million worth of worthwhile calls—and even that feels like a long shot.

Projected Scenarios: The Good, The Bad, and The Ugly

Looking ahead, a few scenarios are lurking on the horizon for the upcoming expiration:

• Between $47,000 and $50,000: Bears reign supreme with 6,600 puts against 400 calls—potentially a $300 million winner for them.
• Between $50,000 and $54,000: Another bear advantage with a net result of $160 million favoring puts over calls.
• Above $54,000: It’s a squeaky win for puts, despite the calls still being in the ring.

For bulls to minimize losses, they need Bitcoin to pick up by 7.2% from its current position to light a little spark of hope. But given the bloodbath from December 4th, they might be running out of steam and funds for more risk. Seems like bears may just be destined to rule the roost this week.

Disclaimer: The views expressed here are strictly those of the author. Always do your own research before making any financial moves.