2021 Bitcoin closing price
Monthly options expiration max pain narrative: $48,000, guess where we closed the year?
In a nutshell the max pain scenario is the price where most of the contracts written, both calls and puts, expire out of the money. Let's just say that there is a strong incentive for contract writers to have price converge to the level where they are able to collect most of the premiums paid. This happens at expiration, therefore I am not surprised at all that the $48,000 level has been a magnet for the past month or so.
Time decay in option value, or theta, indicates the rate of decline due to the passage of time. Option premium is comprised of intrinsic value and extrinsic value, with time being one of the components of the latter.
With price oscillating in a narrow band for the past 30+ days, and heavy numbers of option contracts expiring at year end, the value of many contracts has been eroding constantly during this period, and many or most of those contracts will expire worthless today. In fact, several settlements have already happened at the time of this writing.
Ok, so now we know where Bitcoin closed 2021, what next?
It is conceivable that as the anchor of the $48,000 price disappears today, we will see the price of Bitcoin move swiftly in the coming month. Which direction is the real question. My game plan and analysis calls for a range until we break the level of $53,000, after which a clear and fast shot at ATH is in the cards. Can I be wrong? Of course. However there are several indicators that support my thesis:
Downtrend flip, with successful retest still valid as of today; potential Wyckoff accumulation pattern; continued trend of Bitcoin being moved off exchanges; whales accumulating during this consolidation phase; Bitcoin respecting 200 MA and still very much in a Bull market.
2022 Price Target? Incredibly challenging question to answer. Definitely higher than today, probably in the $100K to $150K range sometimes during the first half of 2022.
Catalysts: More institutional adoption, large public companies buying as Treasury asset, more Central Banks sponsorships.
As always, do your own research and control your bias before investing. I wish you a fantastic start of 2022!
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