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Bitcoin investor sentiment improved after signs pointing to easing inflationary pressures suggested the US Federal Reserve may soon move away from rate hikes and quantitative tightening. A trend change, commonly known as a pivot, will benefit riskier assets such as cryptocurrencies.

On January 22, the US dollar (USDC) traded at a 3.5% premium to the US dollar in China, indicating moderate FOMO among retailers. This level is the highest in more than 6 months, indicating that excessive demand to buy the cryptocurrency has overwhelmed the indicator above the real value.

An all-time high in Bitcoin’s 7-day hash rate, an estimate of the processing power dedicated to mining, also supported the bullish momentum. The index peaked at 276.9 exohashes/second (EH/s) on January 19, signaling a recovery in recent weakness from miners facing financial difficulties.

Despite the bears’ best efforts, Bitcoin has traded above $20,000 since January 14, a move that explains why the expiration of $1.48 billion worth of Bitcoin monthly options will greatly benefit the bulls despite $23,200 the last failure to break resistance.

Bulls were overly bullish but remain well positioned

Bitcoin’s recent rally on January 20 caught the bears by surprise, as only 6% of put (sell) options for monthly expiration were placed above $22,000. So the bulls are better positioned, even though they set almost 40% of their call (call) options at $23,000 or higher.

Bitcoin options consolidate open interest for November 25. Source: CoinGlass

The broader view, which uses a call-to-put ratio of 1.15, indicates more bullish bets, as call (buy) open interest is $790 million versus put (put) options of $680 million. However, most bearish bets are likely to become worthless as Bitcoin rallied 36% in January.

If the price of Bitcoin remains above $22,000 at 8:00 UTC on January 27th, only $38 million worth of put (sell) options will be available. This difference occurs because the right to sell Bitcoin at $21,000 or $22,000 is worthless if it trades higher after expiration.

The Bears could secure $595 million in cap space

Below are the four most likely scenarios based on current price action. The number of options contracts outstanding on January 27 for call (bull) and put (bear) instruments varies depending on the expiration price. The imbalance in favor of each party constitutes a theoretical profit;

  • $20,000 to $21,000. 12,800 calls against 7,100 calls. The net result favors the bulls by $115 million.
  • Between $21,000 and $22,000. 17600 calls against 2800 calls. The net result favors the bulls by $320 million.
  • Between $22,000 and $23,000. 21200 calls against 1100 calls. The bulls remain in control, winning $455 million.
  • $23,000 to $24,000. 25,300 calls for 0. The Bulls completely dominate the deadline, collecting $595 million.

This crude estimate takes into account call options used in bullish bets and put options in exclusively neutral to bearish trades. However, this oversimplification ignores more complex investment strategies.

Related: Bitcoin Should Switch Against Gold, Stocks As BTC Price Drops Below $22.5K

Bitcoin bears need to push the price below $21,000 on January 27 to cut their losses significantly. However, Bitcoin bears recently had $335 million worth of liquidated short leveraged futures positions, so they likely have less margin required to exercise strength in the short term.

Therefore, the most likely scenario for January BTC options expiration is $22,000 or higher, providing a decent win for the bulls.

Bitcoin (BTC) price faced fierce resistance at $23,000 after an 11% rally on January 20, but that was enough to trigger a $335 million liquidation of short positions using futures contracts. A 36% year-over-year gain to $22,500 has the bears ill-prepared for the January 27 expiration of $1.48 billion in monthly options.