Options traders aim for $ 100,000 worth of Bitcoin by the end of 2021, is there any chance?


Bitcoin (BTC) investors are known to be bullish, and even during 50% corrections like the current one, most analysts remain bullish. One of the reasons for investors’ endless optimism and belief in an infinite rise could be the decrease in BTC issuance and the fixed supply limit of 21 million coins.

However, even the most accurate models, including analyst Plan B’s stock-to-flow (S2F), cannot predict bear markets, crashes, or FOMO-induced pumps (fear of missing out). Traders generally misinterpret these concepts because expectations of value and price can easily be misguided.

Bitcoin doesn’t exist in a vacuum, even though BTC maximalists think it does. Therefore, its price action is highly dependent on the number of dollars, euros and yuan in circulation and on interest rates, real estate, stocks and commodities. Even global economic growth and inflationary expectations are having an impact on the risk appetite of people, businesses and mutual funds.

Current Bitcoin Price Factors

Regardless of what these valuation models predict, the price is exclusively composed by market participants at any given time. Contrary to what one might expect, CryptoQuant data only shows 2.5 million Bitcoin currently deposited on the exchanges. Compare that to the 10.7 million who have not been moved in the past 12 months according to “HODL wave” data, and we can say that long-term holders have no say in the matter. price.

As the difference between value (subjective) and price (historical and target) becomes more evident, it’s easier to understand why some investors expect targets of $ 100,000 or more by the end of 2021. However, to correctly interpret the odds placed for these prices, it is necessary to analyze the existing calls (buy) on the options markets.

Bitcoin aggregate call options for December 31st. Source: Bybt

Although calls (calls) largely dominate over protective puts, this is common for almost all asset classes on longer maturities. However, a call option with an exercise price of $ 50,000 should be more representative than an option of $ 200,000, as their prices will be significantly different.

Bitcoin Call Options Market Snapshot on December 31st. Source: Deribit

At the time of writing, a right to acquire (call option) Bitcoin for $ 50,000 on December 31 is valued at $ 4,350. Meanwhile, the same instrument using a strike price of $ 200,000 costs $ 415, or about ten times less.

Cointelegraph previously explained how strikes of $ 100,000 to $ 300,000 should not be viewed as accurate price estimates based on analysis. Investors typically sell higher strike price calls while simultaneously buying the more expensive call option with a lower strike price.

In short, to assume that investors buy ultra-bullish call options exclusively is naive and generally wrong. However, even options strategies involving the writing of these options are generally neutral to bullish.

$ 100,000 is still at stake according to the options markets

According to the Black & Scholes model, the current price of $ 1,185 for the $ 100,000 call option has a mathematical probability of 13%. It should be noted that this methodology considers the prize exclusively on December 31 at 8:00 a.m. ET and does not count the $ 99,999 prize as a success.

Despite this, there is strong evidence that professional traders still value year-end options at $ 100,000. It might seem like overkill at the moment, but Bitcoin’s volatility leaves room for surprise, especially with six months remaining.

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

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