Bitcoin rising to $100k was seen as a foregone conclusion just a few months ago when the index was hovering above $60k, especially around mid April. However, the after the index had a nasty fall back to $30k or so, the long-term target seems less attainable now, even if not out of the equation. But, that is not stopping some options traders to bet on this price level till the end of this calendar year.
Is Options Trading and its Outlandish Predictions Actual Indicators of Future Price Index?
Options trading is a derivative market that allows users to use call to buy signals to predict the future price index and make money from the difference. While the options trading has some influence on the price index itself, the long-term options calls and acquires are rarely actually reflective of the expected future price index. Normally, you can see a pretty large number of outlandish calls including ones at $200k and even further above. Will Bitcoin reach as high as $200k? It is not a high probability that is for sure. Then why do it?
The reason is that the more outlandish the options calls are, the bigger the margins for the options traders. For example, a call option at $50k is regarded as quite reasonable and for that the price is $4.1k or more. However, if the call option is being done at $200k, a much lesser amount, i.e. $415 might do it. So, just because you see a large number of big/outlandish predictions doesn’t mean that the cryptocurrency is in for a big treat in the near future. Traders need to be careful of that.
So is the $100k Prediction Still Viable?
According to analyst Black and Scholes, there is only a 13% chance of the $100k prediction proving itself true by the end of 2021. This probability is on the lower side now but it is mostly because of prevailing market sentiment more than the other. We all know they can change easily with time if the right bullish indicators present themselves. However, the probability doesn’t count $99.9k a success and that shows that even if the index won’t hit $100k in the near future, the probability of a strong upside move is plausible. However, for that, the index will need to grow by 300% within the next 6 months and that is where the prevailing bearish setting is important. If BTC cannot come out of it effectively, the probability will get lower over time.
Image Source: Marco Verch Professional under CC