Bitcoin'southward (BTC) price has been in a down-tendency since the $69,000 all-time high on Nov. 10, when the Labor report showed inflation pushing above half-dozen.2% in the U.s.. While this news could be beneficial for non-inflationary avails, the VanEck concrete Bitcoin commutation-traded fund (ETF) denial by the U.Southward. Securities and Exchange Commission (SEC) on Nov. 12 threw some investors off-guard.

Bitcoin/USD price on Coinbase. Source: TradingView

While the ETF asking denial was generally expected, the reasons given by the regulator may be worrisome for some investors. The SEC cited the disability to avoid market manipulation on the broader Bitcoin market due to unregulated exchanges and heavy trading book based on Tether'southward (USDT) stablecoin.

Analyzing the broader marketplace construction is extremely relevant, especially because that investors closely monitor meetings held by the U.S. Federal Reserve. Regardless of the magnitude of the upcoming tapering in the Fed'southward bond and assets repurchase program, Bitcoin'southward movements have been tracking the U.Southward. Treasury yields over the past 12 months.

Bitcoin/USD at FTX (orange, left) vs. U.S. 10-year Treasury Yields (bluish, right). Source: TradingView

This tight correlation shows how decisive the Federal Reserve'south monetary policy has been with riskier assets, including Bitcoin. Moreover, the yield turn down over the past three weeks from i.64 to 1.43 partially explains the weakness seen in the crypto market.

Obviously, at that place are other factors in play, for example, the marketplace pullback on Nov. 26 was primarily based on concerns over the new COVID-19 variant. Regarding derivatives markets, a Bitcoin cost below $48,000 gives bears consummate control over Dec. 17's $755 million BTC options expiry.

Bitcoin options aggregate open interest for Dec. 17. Source: Coinglass.com

At first sight, the $470 million call (buy) options overshadow the $285 million put (sell) instruments, but the one.64 call-to-put ratio is deceptive because the fourteen% cost drib since Nov. 30 will likely wipe out well-nigh of the bullish bets.

If Bitcoin'south price remains below $49,000 at 8:00 am UTC on Dec. 17, only $28 1000000 worth of those call (purchase) options will be available at the expiry. In short, in that location is no value in the right to buy Bitcoin at $49,000 if it is trading below that price.

Bears are comfy with Bitcoin below $57,000

Here are the three most probable scenarios for the $755 million Dec. 17's options decease. The imbalance favoring each side represents the theoretical profit. In other words, depending on the expiry cost, the quantity of call (buy) and put (sell) contracts becoming active varies:

  • Between $45,000 and $47,000: 110 calls vs. two,400 puts. The net result is $105 1000000 favoring the put (bear) options.
  • Between $47,000 and $48,000: 280 calls vs. 1,900 puts. The internet result is $75 million favoring the put (bear) instruments.
  • Between $48,000 and $fifty,000: 1,190 calls vs. ane,130 puts. The internet consequence is counterbalanced between call and put options.

This crude estimate considers call options existence used in bullish bets and put options exclusively in neutral-to-bearish trades. However, this oversimplification disregards more complex investment strategies.

For instance, a trader could have sold a put option, finer gaining a positive exposure to Bitcoin (BTC) to a higher place a specific price. Simply, unfortunately, in that location's no easy way to estimate this consequence.

Bulls need $48,000 or higher to balance the scales

The only way for bulls to avoid a significant loss in the December. 17 expiry is past sustaining Bitcoin'southward price above $48,000. All the same, if the current short-term negative sentiment prevails, bears could easily pressure level the price downwardly 4% from the current $48,500 and profit up to $105 meg if Bitcoin price stays below $47,000.

Currently, options markets data slightly favor the put (sell) options, thus creating opportunities for additional negative pressure.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should comport your own research when making a determination.