Bitcoin Takes a Nasty Hit

On November 21, Bitcoin (BTC) suffered a catastrophic price slide, dipping down to $15,500—a level it hadn’t seen in two years. Talk about a dark day for crypto enthusiasts! This price plummet represented an 8% downtrend and annihilated $230 million in leveraged long futures contracts in just two days.

This unexpected drop gave hope to the bearish crowd, who thought we might just see a sub-$15,500 expiry during the options expiry on December 9. Spoiler alert: that prediction isn’t likely to pan out as the clock ticks down.

Year-to-Date Decline and Market Position

Despite the grim current climate, Bitcoin has experienced a wild ride this year, clocking in a 65% decline in 2022. Yet, it astonishingly remains a top 30 global asset, even overshadowing tech giants like Meta Platforms and Coca-Cola. You can’t keep a good digital currency down!

Economic Woes and Fed Concerns

The underlying fear gripping investors is the looming threat of a recession, especially if the U.S. Federal Reserve tightens the economic screws for a more extended period. Recent employment stats revealed 263,000 new jobs in November, reminding us all that the Fed’s battle against inflation is far from over. Azhar Iqbal, a director at Wells Fargo, has joined the chorus, suggesting all signs point towards a recession in 2023. Just what we needed, right?

“Financial indicators point to a recession on the horizon.” – Azhar Iqbal

Overconfident Bears and Their Next Moves

The upcoming options expiry on December 9 has a mind-boggling open interest of $320 million. But here’s the kicker: many bears expected the price to drop below $15,500, so their optimism may just come crumbling down. As of now, Bitcoin hovers around the $16,900 mark, making most of those bearish bets seem as useful as a chocolate teapot.

Decoding Potential Price Scenarios

With the state of the market in flux, let’s break down the four most likely scenarios for Bitcoin’s price action as we head toward December 9 options expiry:

• Between $15,500 and $16,500: 200 calls vs. 2,100 puts, netting a $30 million win for puts.
• Between $16,500 and $17,000: 1,700 calls vs. 1,500 puts—balance is key here.
• Between $17,000 and $18,000: 5,500 calls vs. 100 puts, giving bulls a glorious $100 million boost.
• Between $18,000 and $18,500: 7,300 calls and zero puts, allowing bulls to clean house with $130 million!

Now, before you think these estimates are foolproof, remember that this is a simplified view that skips over some potentially complicated investment strategies that traders might employ.

What’s Next for the Bulls and Bears?

For the bulls to cash in on that sweet $130 million profit, they’ll need to push Bitcoin above $18,000 by Friday. Conversely, bears are praying for just a nudge below $16,500 to maximize their own earnings. With $230 million in leveraged longs recently liquidated, bulls may find themselves in a tighter spot than they’d prefer.

With the added pressure of recession fears and climbing interest rates in traditional markets, bears are likely eyeing that $17,000 mark closely. They wouldn’t want to find themselves on the wrong side of this rollercoaster, that’s for sure!