coindesk.com
The way BTC options trading on Deribit are currently priced suggests a 9.58% chance of prices rising above $100,000 by Dec. 27.
The possibility of prices rising to $82,000 is higher, according to one observer.
Options market probabilities can change quickly with market conditions.
As sophisticated and retail investors rally around the possibility of bitcoin's (BTC) price surging to at least $100,000 by the year-end, the options market tied to the cryptocurrency assigns a low probability of such a surge materializing.
At press time, the way options were priced on dominant exchange Deribit showed a 9.58% probability of BTC topping the $100,000 mark by the end of December, according to data source Deribit Metrics.
Options are derivative contracts that give the purchaser the right but not the obligation to purchase or sell the underlying asset at a predetermined price on or before a specific date. A call option confers the right to buy, representing a bullish bet, while a put protects against downside price swings.
The near 10% figure may seem puzzling to the bulls, given the market has moved beyond the supply overhang fears of the second and third quarters and is reportedly on an bullish trajectory, largely due to the Federal Reserve's renewed bias for interest rate cuts.
That said, it seems consistent with the steady bitcoin implied volatility, suggesting that market participants don't expect wild moves in the short term.
Deribit's bitcoin implied volatility index (DVOL), which shows expected price turbulence over 30 days in annualized terms, remains locked between the three-month range of 50% to 60%, well below the 2024 high of 85% hit in March.
Options-implied probabilities are calculated by using the Block-Scholes model or other pricing models that take into account factors like current spot market price, strike price, time to expiration, volatility, and the risk-free rate. Options-based probabilities are positively correlated with implied volatility: The greater the volatility, the higher the odds of bitcoin hitting certain levels.
$82K realistic possibility
Several traders recently told CoinDesk that prices could rise to around $80,000 by the end of the year, irrespective of who wins the pivotal U.S. election, due Nov. 5.
The options market does suggest a possibility of a 22% price swing in either direction by the end of December.
"The current market implied volatility of BTC at-the-money options expiring on Dec. 27 is 54%, which means that in the 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 an equivalent drop cannot be ruled out either," Ardern said.
Probabilities are just probabilities
Options market probabilities can change quickly with market conditions, meaning the odds of a move to $100,000 by the year-end could improve if implied volatility jumps and prices set new highs.
The impending U.S. presidential election due on Nov. 5 could have far-reaching regulatory implications for the digital assets industry and could inject volatility into the market. Currently, the supposedly-pro crypto Republican candidate is ahead of his rival, Democrat Kamala Harris, in election polls. The election result will be declared on Nov. 8.
"A Harris or Trump victory is not fully priced in and crypto investors need to be ready for a lot of volatility either way. This reminds me of biotech stocks on the dates the FDA determines if the drugs are approved. These stocks either fly or crash on those days and you can typically bet something volatile will happen," Blume said in an email.
Harris added that a Harris victory wouldn't be positive, at least for some time, as traders anticipating a Trump victory could square off their leveraged bets, injecting bearish volatility into the bitcoin market.