Bitcoin investors are notoriously bullish, and even during the current 50% correction, most analysts remain bullish. One reason for investors’ endless optimism and belief in infinite upside potential could be that Bitcoin is deflationary with a fixed supply cap of 21 million coins.

However, the most accurate models, including Analyst Plan B’s Stock-to-Flow (S2F), cannot predict bear markets, crashes, or pumps caused by FOMO (fear of missing out). Traders often misunderstand these concepts because it can be easy to confuse value expectations with price.

Bitcoin doesn’t exist in a vacuum, even if Bitcoin maximalists think so. As a result, its price development depends heavily on the number of dollars, euros and renminbi in circulation, as well as interest rates, real estate, stocks and commodities. Global economic growth and inflation expectations also affect the risk appetite of investors, companies and mutual funds.

The current price dynamics of 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 that 2.5 million bitcoins are currently deposited on exchanges. Compare that to the 10.7 million that haven’t moved in the past 12 months according to the “hold waves” data, and we can say that the long-term owners have no control over the price.

As the distinction between (subjective) value and price (historical and objective) becomes clearer, it is understandable 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 for these prices, one has to analyze the existing calls in the options market.

Summary of Bitcoin Call Options for December 31st | Source: Bybt

While a call option has a major advantage over the protection of put options, this is common with long-term maturities for almost every asset class.

The Bitcoin Call Options market will expire on December 31st | Source: Deribit

At the time of writing, the right to buy Bitcoin for $ 50,000 on December 31 was valued at $ 4,350. Meanwhile, the same instrument with an exercise price of $ 200,000 costs $ 415, about ten times less.

Bitcoin magazine previously stated that exercise prices between $ 100,000 and $ 300,000 should not be considered accurate price estimates based on analysis. Investors often sell buy orders with a higher exercise price and at the same time buy a more expensive call with a lower exercise price.

In short, the assumption that investors are monopolizing extremely bullish call options is naive and misleading.

$ 100,000 is still 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 3:00 p.m. US time and doesn’t count the $ 99,999 price as a success.

Even so, there is strong evidence that professional traders are still pricing their options at $ 100,000 by the end of the year. It may seem too far-fetched at the moment, but Bitcoin’s volatility continues to surprise us, especially when you consider that it will be another six months.

Mr. Teacher

According to Cointelegraph

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