Bitcoin Price May Hit $50,000 In 2021? Options Market Thinks So

KEY POINTS

$150,000 worth of BTC $50K call options have been traded for June and December 2021 strikes
Options and futures prices have been used as a price indicator in the crypto spot market
Investors were closely following the options prices on the days leading to June 26, when the largest batch of options was set to expire

More and more investors are betting on the price of Bitcoin hitting an unprecedented $50,000 by 2021. Over $150,000 worth of BTC $50K call options have been traded for June and December 2021 strikes. These bullish trades by options investors were intermediated on the LedgerX derivatives exchange.

The trade is in effect predicting a $50,000 price in 18 months, according to Cointelegraph. Interestingly, even at 100% volatility, the probability to reach the particular target price is less than 8%. The seller of this option has an unlimited downside if the price somehow manages to exceed the target, and for this the seller is asking a $1,000 payment upfront.

There is another December 2021 call option for a $25,000 strike which is currently trading at $1,750. If the price reaches $40,000, the buyer will profit $13,250, which is a massive 650% return on investment.

Options and futures prices have been used as a price indicator in the crypto spot market. For example, a ‘gap’ in futures could indicate that spot market prices would, at some point, fill that gap price.

Spot investors also look at options and futures prices at exchanges with high volume of institutional investors because of the belief that institutions could dictate the future price of the world’s first cryptocurrency. For example, investors were closely following the options prices on the days leading to June 26, when the largest batch of options was set to expire.

Cointelegraph noted that one such bet in the past did not pay off well. In December 2017, the month Bitcoin reached its all-time high, investment firm Blocktower Capital put a $50k call options set to mature after 12 months and paid $1 million for it. The trade’s profit or loss could not be estimated but the $1 million is certainly lost. Blocktower Capital CIO Ari Paul said in 2018, however, that those calls were bought as a hedge as he simultaneously sold BTC and other assets.

“I was betting on the possibility for a very sharp move in either direction, not on BTC ending the year over $50k,” he said on Twitter.