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The way BTC options traded on Deribit are currently priced suggests a 9.58% chance that prices will rise above $100,000 by December 27.
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Prices are more likely to rise to $82,000, according to one observer.
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The market opportunities for options can change quickly due to market conditions.
While sophisticated and retail investors are rallying around the possibility of Bitcoin’s price rising to at least $100,000 by the end of the year, the options market associated with the cryptocurrency believes such a rise is unlikely to occur.
At the time of writing, the way options were priced on the dominant exchange Deribit showed a 9.58% probability of BTC crossing the $100,000 mark by the end of December, according to data source Deribit Metrics.
Options are derivative contracts that give the buyer the right, but not the obligation, to buy or sell the underlying asset at a predetermined price on or before a specific date. A call option gives the right to buy and represents a bullish bet, while a put protects against downward price movements.
The near 10% figure may seem puzzling to the bulls as the market has moved on from supply glut fears in the second and third quarters and is reportedly on a bullish trajectory, largely due to the renewed tendency of the Federal Reserve to lower interest rates.
That said, it seems consistent with bitcoin’s steady implied volatility, which suggests market participants aren’t expecting wild moves anytime soon.
Deribit’s implied volatility index (DVOL), which shows expected 30-day annualized price turbulence, remains locked between the quarterly range of 50% to 60%, well below the 2024 high of 85% in March.
Options-implied probabilities are calculated using the Block-Scholes model or other pricing models that take into account factors such as the current spot market price, strike price, time to expiration, volatility and the risk-free rate. Options-based odds are positively correlated with implied volatility: the higher the volatility, the more likely bitcoin is to reach certain levels.
Several traders recently told CoinDesk that prices could rise to around $80,000 by the end of the year, regardless of who wins the crucial US elections, which take place on November 5.
The options market suggests the possibility of a 22% price swing in either direction by the end of December, meaning room for a rally above $80,000 by the end of the year.
“The current implied market volatility of BTC at-the-money options expiring on December 27 is 54%, meaning that in a best-case scenario, the price of BTC will rise by more than 22% to around $82,000 by the end. of the year,” Griffin Ardern, head of options trading and research at crypto-financial platform BloFin, told CoinDesk.
“However, volatility is bi-directional, so a similar decline cannot be ruled out,” Ardern said.
Opportunities in the options market can change quickly due to market conditions, meaning the odds of a move to $100,000 could improve by the end of the year as implied volatility increases and prices reach new highs.
The upcoming US presidential election on November 5 could have far-reaching regulatory implications for the digital asset sector and add volatility to the market. Currently, the supposedly pro-crypto Republican candidate Donald Trump is ahead of his rival, Democrat Kamala Harris, in the election polls. The election results will be announced on November 8.
“A Harris or Trump victory is not yet fully priced in and crypto investors should be prepared for a lot of volatility either way. This reminds me of biotech stocks on the dates when the FDA determines whether to approve the drugs. These stocks are flying or crashing. on those days and you can usually count on something volatile happening,” Alexander Blume, CEO of SEC-registered digital asset advisory firm Two Prime, said in an email.
Blume added that a Harris victory would not be positive, at least for a while, because traders anticipating a Trump victory could liquidate their leveraged bets, injecting bearish volatility into the bitcoin market.
