Bitcoin (BTC) bulls jumped in to defend the $40,000 level after a devastating retest of the $38,000 support on March 7. The confidence and momentum that was building earlier in the month was suddenly shattered after BTC failed to break above $44,500 for the third time this year. month March 2.

The rally in Bitcoin price on March 9 has been attributed in part to this week’s expected US inflation data report. Analysts expect another 40-year all-time high as the consumer price index (CPI) hits a 7.9% year-on-year increase.

Additionally, a statement from US Treasury Secretary Janet Yellen on President Biden’s executive order on digital assets was somewhat softer than expected. Although it was removed from the US Treasury Department’s website because it was apparently posted earlier in error, the order will apparently call for “a coordinated and comprehensive approach to digital asset policy.”

Commodities rally was a harbinger of Bitcoin’s rise

Considering that the Bloomberg Commodity Index (BCOM) hit an all-time high of 134 on March 8, Bitcoin’s recent strength should come as no surprise. Despite correcting to 129, BCOM’s 30-day gains remain at 18.5%, according to MarketWatch.

According to open interest at Friday’s options expiry, Bitcoin bulls placed heavy bets between $44,000 and $48,000. These levels may seem bullish at the moment, but Bitcoin tested this level eight days ago.

Bitcoin options accrue open interest for March 11. Source: CoinGlass

A broader view uses the call-to-put ratio and shows a 40% advantage for Bitcoin bulls as $460M calls have higher open interest versus puts ( put) of USD 330 million. However, the call-to-put indicator of 1.40 is misleading because most bullish bets will lose their value.

For example, if the price of Bitcoin remains below $43,000 at 8:00 am UTC on March 11, only $190 million of those call options will be available. This effect occurs because there is no value in the right to buy Bitcoin at $44,000 if it trades below that level.

The Bulls could pocket $140 million to $42,000

Below are the three most likely scenarios based on the current price action. The number of option contracts available on March 11 for bullish (call) and bearish (put) instruments varies depending on the expiry price. The imbalance in favor of each side constitutes the theoretical profit:

Between $40,000 and $42,000: 2,600 calls vs. 2,100 put options. The net result is balanced between the call (bull) and put (bear) options. Between $42,000 and $43,000: 4,500 calls vs. 1150 put. The net result favors the bulls by $140 million. Between $43,000 and $44,000: 5,100 calls vs. 700 puts. The net result favors call (bull) instruments by $190 million.

This raw estimate considers calls used on bullish bets and puts used exclusively on neutral to bearish trades. Still, this simplification ignores more complex investment strategies.

For example, a trader could have sold a call option, effectively gaining negative exposure to Bitcoin above a specific price. Unfortunately, there is no easy way to estimate this effect.

The bears need a BTC price below $42,000 to balance the scales

Bitcoin bulls need to have $42,000 to make a profit of $140 million on March 11. Furthermore, a 2% price increase from the current level of $42,200 is enough for Bitcoin bulls to lock in a $190 million profit at Friday’s options expiry.

The bears will face a hard time suppressing the price given the positive short-term sentiment on inflation expectations and less pressure from regulators. Currently, data from the options markets favors call options.

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

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