Does Bitcoin Options Data Suggest Whales Betting BTC Will Hit $50K in January?

Deribit dominates the Bitcoin options market, with an impressive 90% market share. Currently, there is a staggering $2.05 billion in open interest in options contracts that expire on January 26. However, it is important to note that a large portion of this could lose value as the expiration date approaches.

Deribit BTC options open interest for January 26, BTC terms. Source: Deribit

With the possibility of regulatory approval for spot exchange-traded funds (ETFs), bullish bets that were previously put on hold are re-entering the market.

Cost of a call option

Currently, a $54,000 call option that expires on January 26th costs 0.02 BTC, which is about $880 at current market prices. This option requires Bitcoin to rise 25% in the next 49 days for the buyer to profit. It is worth noting that sellers can use BTC futures to hedge their positions while collecting the option premium, thereby reducing some of the perceived risk associated with the transaction.

Analysts have highlighted the importance of the $250 million open interest in $50,000 call options. At the current price of $44,000, the total value of these options is $8.8 million. This value could grow significantly if regulators approve the spot ETF plan. However, it remains uncertain whether the buyers of these $50,000 call options intend to use them for bullish strategies.

Call options in the $70,000 to $80,000 range have relatively low demand, accounting for less than 20% of open interest, indicating a lack of enthusiasm among bulls. These options have an exposure of $285 million and are currently worth only $1.2 million. In contrast, open interest in the $60,000 and $65,000 call options expiring on December 29 is $250 million.

On the put options side, traders appear cautious about January expiration, with 97% of bets placed at or below $42,000. Unless there is a major reversal in the current price action, the outlook for $568 million in put options open interest is likely to be bleak. Nonetheless, selling put options can provide traders with a way to gain positive exposure to Bitcoin above a specific price level, although it remains challenging to accurately assess the impact.

Don’t Underestimate Bitcoin Put Options (For Now)

Open interest in January 26th call options is 2.6 times that of put options on Deribit, indicating that more people prefer neutral to bullish strategies. While the appeal of $50,000 calls is undeniable and has the potential to drive Bitcoin prices higher, it is important to remember that the expiration price is only determined at 8:00 UTC on January 26th, so it is too early to invest much energy at this time.

The ideal scenario for Bitcoin bears is that the ETF proposal is rejected, although the SEC may ask for more time to make a final decision, especially considering that many of the filings have been amended recently. Currently, industry experts, including Bloomberg's senior ETF analyst, estimate the probability of approval to be 90%.

With 49 days until expiration on January 26, it seems unreasonable to consider 97% of put options worthless. In addition, bears also have the support of the regulatory environment, as the trial involving Binance and its founder Changpeng Zhao could have a significant impact on market sentiment.