Options traders aim to make $ 100,000 in Bitcoin by the end of 2021. Is there a chance?
Bitcoin (BTC) investors are notoriously bullish, and even during the current 50% correction, most analysts remain bullish. One reason for the endless optimism and belief of investors in an infinite upside potential could be the declining issue of BTC and the fixed supply cap of 21 million coins.
However, even the most accurate models, including stock flow (S2F) from a Plan B analyst, cannot predict bear markets, crashes or pumps caused by FOMO (fear of missing out). Traders often misunderstand these concepts because value and price expectations can easily be confused.
Bitcoin doesn’t exist in a vacuum, even if BTC maximalists think so. As a result, its price development depends heavily on the number of dollars, euros and yuan in circulation, as well as interest rates, real estate, stocks and raw materials. Even global economic growth and inflation expectations are affecting the risk appetite of people, companies and mutual funds.
Current price drivers for Bitcoin
Regardless of what these pricing models predict, prices are created by market participants at all times. Contrary to what one might expect, data from CryptoQuant shows only 2.5 million bitcoins currently on exchanges. Compare that to the 10.7 million that haven’t moved in the past 12 months following the ‘HODL wave’ data, and we can say that the long-term owners have no say in the price. .
As the distinction between (subjective) value and price (historical and objective) becomes clearer, it becomes easier to understand why some investors expect a target of $ 100,000 or more by the end of 2021. However, in order to explain exactly which odds are placed at these prices, one has to analyze the calls (buy) available on the options market.
While a call (call) option dominates a protective call, this is common for almost every asset class in the event of a long-term expiry. However, $ 50,000 call options should represent more than $ 200,000 as their prices will differ significantly.
At the time of writing, a call (call) Bitcoin for $ 50,000 on December 31st is valued at $ 4,350. Meanwhile, the same instrument with the real price of $ 200,000 costs $ 415, about 10 times less.
Cointelegraph previously stated that strikes between $ 100,000 and $ 300,000 should not be viewed as accurate price estimates backed by analysis. Investors typically sell higher strike calls while buying a more expensive call with a lower strike.
In short, the assumption that investors will only buy extremely bullish call options is misguided and often misguided. But even option strategies that involve selling these options are generally neutral to bullish.
$ 100,000 is still playing in the options market
Using the Black & Scholes model, the current price of $ 1,185 for a call of $ 100,000 has a mathematical probability of 13%. It’s worth noting that this method only takes into account the price on December 31st at 8 a.m. ET and doesn’t count the $ 99,999 price as a success.
Even so, there is strong evidence that professional traders are still pricing in $ 100,000 options by the end of the year. It may seem too far-fetched at the moment, but Bitcoin’s volatility opens the door to surprises, especially with half a year ahead of us.
The views and opinions expressed here are those of author and do not necessarily reflect the views of Cointelegraph. Every investment and trading movement involves risks. You should do your own research when making a decision.