Bitcoin Bulls Bet On BTC, May Hit $36,000 Before Christmas
Bitcoin options traders are preparing for BTC levels to hit $ 36,000 by the end of 2020.
The relationship between the two assets has been growing recently and remains at 60% over 30 days. As this account gains power in the market, traditional investors are likely to hold the positions of Bitcoin and gold which may for the same reason protect themselves from market shocks. This could lead to Bitcoin and Gold having price movements similar to each other’s direction, as per report from Ecoinometrics.
BTC Options Are Beyond Risk
The aggressive overload of the call options at exercise prices of USD 24,000 and USD 36,000 is a sign of “tail risk management”. Tail events are rare events that fluctuate in price.
The graph below shows that the maximum number of bets is $ 10,000. On the right, however, there is a large tail that goes from the strike price of $ 20,000 to $ 36,000.
Broad calls bought at such extreme prices reflect a possible “spike” in option prices. As the price of BTC increases, these calls get more expensive and exceed the actual increase in the spot price.
However, the likelihood of BTC hitting its all-time high of $ 20 by December 20th is only 6%. That number is much higher after $ 28,000. By limiting the price drops paid on options, investors can take advantage of the unlikely but highly profitable growth.
When calls put pressure on the market, companies betting that high on calls can also reduce their spot or forward risk.
Undefined Time And Impermanence
The open interest put / call ratio on the options market fluctuated from 0.4 to 0.75 last year. An increase in the quota generally represents an increasing safeguard against a possible decline that puts the market under pressure.
This ratio currently corresponds to the previous level of high efficiency of sellers or orders. The implied volatility is higher than the actual volatility, which clearly indicates a short period of consolidation before the start. As the price continued in the $ 10,000-10,500 range with no major sales, consolidation accelerated.
However, the 2020 US elections in November are causing great uncertainty in the markets. Even the VIX index of the S&P 500 predicts very high volatility in traditional markets, especially towards the end of the year. The correlation coefficient between the stock market and Bitcoin has strengthened again since a decline in the third quarter of 2020.
Bitcoin is unlikely to be correlated and is a concept test in the coming months as the world’s largest economy chooses its new leader.
Options traders bought 1,444 calls on Sunday at an exercise price of over $ 28,000. The support of the low volatility in BTC price above $ 10,000 could soon end the decline and lead to a rapid consolidation. The high volatility of the upcoming US election and equity markets could lead investors to reduce spot risk.
Bitcoin options traders are aggressively buying high-priced call options. Deorbit, a major cryptocurrency derivatives exchange, bought 752, 462 and 230 contracts on September 13 at strike prices of $ 36,000, $ 32,000 and $ 28,000, respectively. With each contract, the buyer can buy one bitcoin at the strike price when it expires.
With traders betting on BTC to hit new highs, the current macro environment has many uncertainties. Still not have a trading account ? Bitdenex provides a hassle free registration experience, so create an account on Bitdenex and start trading now.