Bitcoin’s recovery from Monday’s low is picking up speed. The prices for the options market are in the double digits at over USD 50,000 at the end of the month.
The leading cryptocurrency by market value is currently trading at $ 38,300, which translates into a 24-hour profit of nearly $ 4,000, or 11%, according to CoinDesk 20 data.
The price rally has erased a significant portion of the losses seen earlier this week. Bitcoin fell from $ 40,000 to $ 30,305 on Monday as the spot market sold heavily, particularly on the U.S. Coinbase exchange.
Despite the rebound, the cryptocurrency is still well below the record high of $ 41,962 that was recorded on Jan. 8.
Options market data shows investors are betting on a sustained rally and assigning a 20% chance of the cryptocurrency rising above $ 50,000 by January 29th (monthly expiry), according to data from the crypto derivatives research firm Aslant.
Option probabilities are calculated using the Black-Scholes formula, which is based on critical metrics such as call option prices, exercise prices, the price of the underlying asset and the “risk-free” interest rate for investments as US Treasuries, as well as the time to maturity.
Options are derivative contracts that give the buyer the right, but not the obligation, to buy the underlying asset on or before a specified date at a specified price. A call option represents a purchase right and a put option represents the right to sell.
The 20% chance that Bitcoin will climb above $ 50,000 by January 29th is impressive considering the monthly expiration is only two weeks away and the cryptocurrency is currently down 31% from $ 50,000. The probability that Bitcoin will rise above a certain level on or before the expiration correlates positively with the time remaining until the expiration.
A 31% rally to $ 50,000 in two weeks is difficult to imagine, but by no means impossible. as stated by Deribit Insights. The cryptocurrency has seen more significant changes in the recent past. In the last two weeks of December alone, prices rose 52% from USD 19,000 to USD 29,000.
The bullish momentum would pick up again if institutional inflows resumed, Chris Thomas, Head of Digital Assets at Swissquote Bank, told CoinDesk on Wednesday. The Grayscale Bitcoin Trust (GBTC), the largest publicly traded crypto investment trust, reopened Tuesday after a month-long hiatus. The grayscale inflows are key to a rally in bitcoin prices, according to investment banking giant JPMorgan.
President-elect Joe Biden is also expected to do the same announce A $ 2 trillion stimulus on Thursday that will bolster the cryptocurrency’s long-term uptrend. Bitcoin is viewed by well-known publicly traded companies like MicroStrategy as a hedge against monetary and tax discipline.
Call options asked
The put-call skews of one, three and six months, which measure the puts costs in relation to calls, remain anchored in the negative range according to the skew data. This is a sign of calls or bullish bets that attract more demand than puts.
The one-month put-call offset has fallen to a life low of -35.9, indicating a record bullish sentiment. Investors have been buying the $ 52,000 call, which expires on January 29, since Tuesday.
“In the last 24 hours, the call option of USD 52,000 registered a purchase volume of 2,059 contracts. In the meantime, the call has a value of 36,000 US dollars and a purchase volume of 1,211 contracts, ”said the Swiss-based data analysis platform Laevitas to CoinDesk.
It remains to be seen whether Bitcoin will go parabolic before the January expiration. The flow of coins to the exchanges has increased after the decline on Monday and could limit the upward trend in the short term.
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