The open interest on Bitcoin (BTC) Dec. 31 call options between $100,000 and $300,000 reached an impressive 6,700 contracts, which is currently worth $385 million. These derivatives give the buyer the right to acquire Bitcoin for a fixed price, while the seller is obliged to honor the price.
One might think that this is a great way to leverage a long position, but it comes at a cost and is usually quite high. For this right, the buyer pays an upfront fee (premium) to the call option seller. For example, the $100,000 call option is currently trading at 0.164 BTC, equivalent to $9,480.
For this reason, option traders seldomly buy these options by themselves. Therefore, longer-expiry derivatives usually involve multiple strike prices or calendar months.
Shown above is an actual trade arranged by Paradigm, an institutional investor-focused over-the-counter trading desk. In this trade, a total of 37 BTC December $100,000 and $140,000 calls have been traded between two of their clients.
Unfortunately, there’s no way to know which side the market maker was, but considering the risks involved, one can assume the client was looking for a bullish position.
By selling the $140,000 call option and simultaneously buying the more expensive $100,000 call, this client paid a $138,000 upfront premium. This amount represents their max loss, which takes place at $100,000 price on Dec. 31.
The red line on the above simulation shows the net outcome at expiry, measured in BTC. Meanwhile, the green line displays the theoretical net return on June 30.
Thus, this client needs Bitcoin to trade at $65,600 or higher on June 30 to recoup their investment. This number is significantly lower than the $107,150 required for the break-even if this “call spread” strategy buyer holds until the December expiry.
This phenomenon is caused by the $100,000 call option price appreciation being larger than the $140,000. While a Bitcoin price increase to $65,600 is quite relevant for a $100,000 option with six months left, it is not so much for the $140,000 one.
Countless strategies can be achieved by trading ultra-bullish call options, although the buyer doesn’t need to wait for the expiry date to lock in profits. Thus, if Bitcoin happens to increase by 30% in a couple of months, it makes sense for this call spread holder to unwind their position.
As shown in the example above, if Bitcoin reaches $75,000 in June, the buyer can lock in a $23,000 net profit by closing the position.
While it’s exciting to see exchanges offering massive $100,000–$300,000 expiries, these figures should not be taken as precise analysis-backed price estimates.
Professional traders use these instruments to conduct bullish but controlled investment strategies.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.
Bitcoin Will Significantly Underperform Altcoin Market As New Crypto Price Era Unfolds: Pantera Capital’s Dan Morehead
The founder and chief executive officer of Pantera Capital says that investors can expect altcoins to outperform Bitcoin (BTC) in the long term.
In a recent edition of Pantera’s Blockchain Letter, the head of the digital asset management firm outlines Dan Morehead’s key quotes from the SALT 2021 conference in New York. During the conference, Morehead said that even though his company has greatly profited from BTC, he emphasized that most future crypto gains will come from altcoin investments.ADVERTISEMENT
“My perspective is: Bitcoin has been amazing – Pantera Bitcoin Fund is up 67,000% since inception. However, I think the majority of future gains will be from tokens outside of Bitcoin. I know that sounds heretical to some people here, but that’s my professional opinion.”
Morehead compares the rise of Bitcoin and its competitors to that of the tech industry boom during the late 1990s.
“It’s like saying in 1998 that [the] majority of future tech gains would come from outside Microsoft.
At the time, Microsoft was worth $218 billion, Apple $3.5 billion, Amazon was $2.2 billion. Google and Facebook were zero – they didn’t even exist. In the years since Microsoft did great – it went up 10x. However, 80% of the tech gains in these five stocks came from outside Microsoft.
That’s the view I have here – I think BTC is going to go up a ton – like 10x. It’s a great investment…[but] I think the broader portfolio is going to outperform.”
At time of writing, BTC has a market cap of $1.156 trillion while all altcoins combined have a market cap of $1.327 trillion, according to CoinMarketCap.
s are now selling ‘way more’ US Dollars to buy Bitcoin
President Nayib Bukele shared this new development on Twitter based on the data acquired from El Salvador’s in-house wallet service, Chivo. President Bukele said:
“People are inserting way more USD (to buy #BTC) than what they are withdrawing from the Chivo ATMs.”
He also urged media outlets to independently confirm the above information by visiting the ATMs. President Bukele further stated that Chivo has reported 24,076 remittance requests “adding up to $3,069,761.05 in one day.”
2 new Chivo Facts:
1. People are inserting way more USD (to buy #BTC) than what they are withdrawing from the Chivo ATMs (any media outlet can independently confirm this by visiting the ATMs).
2. Today, we received 24,076 remittances, adding up to $3,069,761.05 (in one day).— Nayib Bukele 🇸🇻 (@nayibbukele) October 16, 2021
The increase in USD to Bitcoin conversions within the jurisdiction reflects a change in investor sentiment, which initially faced resistance during adoption from the general public. Moreover, the Salvadorean government offers various subsidies for using Bitcoin such as fuel subsidies and tax exemptions.
El Salvador has installed over 200 ATMs after adopting Bitcoin as a legal tender, making it the third-largest network of crypto ATMs after the United States and Canada.
A Cointelegraph report shows that El Salvador exceeded United Kingdom’s crypto ATM count after deploying 205 crypto ATMs, mainly to facilitate local Bitcoin transactions and Bitcoin to U.S. dollars conversions.
Recently, the Salvadorean government announced to build a $4 million veterinary hospital using the profits attained during the Bitcoin bull market. According to President Bukele, the veterinary hospital will host four operating rooms, four emergency clinics, 19 offices, and a rehabilitation area: “We decided to invest a part of that money in this: a veterinary hospital for our furry friends.”
Why Bitcoin ETF Is Such A Big Deal and May Push Bitcoin Above $100k?
Amid a global regulatory crackdown on cryptocurrencies, the U.S. SEC’s approval of a Bitcoin (BTC) Exchange-Traded Fund (ETF) has come as a pleasant surprise to the Bitcoin community. The most awaited ProShares Bitcoin Strategy ETF is reportedly launching as early as Monday, October 18. This ETF is going to be traded with a ticker symbol of BITO and will track Bitcoin futures.
Bitcoin rallies towards $100K
Instead of achieving regulatory green light, Bitcoin price crossed $62K this morning with a slight correction, BTC continued to stand strong at $61.5K, at the time of reporting. The market is raging with speculation of Bitcoin crossing $100K with this ETF. The timing could not have been better as the fourth quarter has commenced the holiday season bull run, with trader bonuses flooding in as cryptocurrencies take to an upward graph. Since the beginning of October, when the potential BTC ETF began gaining mass traction, the impact on Bitcoin prices also became evident.
According to a Bloomberg report, this Bitcoin ETF will further the institutional adoption of the decentralized sphere, specifically focused on Bitcoin. “An ETF should provide greater ease-of-use for retail investors looking to ride Bitcoin’s often hair-raising ups and downs. Like securities tracking oil and gold, it will change hands on relatively familiar U.S. stock-market venues, rather than in cryptocurrency or futures exchanges whose workings are imposing to some users.”
Regulatory approval can make or break a token
The frequently validated fact that regulatory approval radically helps the growth of cryptocurrencies, despite it being a decentralized and unregulated market, continues to gain credibility. XRP is one of the most prominent examples of how drowning in a regulatory puddle may keep certain tokens into a bear rut, while the rest of the industry leaps into the bullish phase. Due to the ongoing XRP lawsuit against Ripple, the XRP community continues to suffer as the fourth quarter has not helped XRP so far. The community blames the SEC for stretching the lawsuit intentionally so that XRP skips this bull run.