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Odds of Bitcoin Hitting Record High in 2020 Are (Slightly) Up, Options Data Suggests


www.coindesk.com 28 July 2020 13:30, UTC
Reading time: ~2 m

The likelihood of bitcoin challenging record highs by the end of the year may have have increased with the cryptocurrency’s violation of major price resistance – but don’t raise your hopes too high just yet.

  • Bitcoin jumped above $10,300 on Sunday, breaching the resistance of a trendline falling from the December 2017 to June 2019 highs. 
  • Following the bullish move, the options market now shows a 7% probability of bitcoin rising to the historical 2017 all-time high of $20,000 before year's end, according to data from crypto derivatives analytics firm Skew. 
  • The number had dropped to 4% a week ago with short-term implied volatility, a gauge of the market's expectations for bitcoin's future volatility, falling to record lows.
  • "Options market is repricing quickly the probability of [new highs] by the end of the year, from 4 to 7% over the last week," Skew CEO Emmanuel Goh told CoinDesk in a Telegram Chat.
  • However, the odds remain below 10%, meaning traders believe a rally to $20,000 is unlikely to happen this year.
  • That's because market participants "as yet remain unconvinced that this short-term rise in volatility will extend into year-end," said Shaun Phoon, a trader at QCP Capital.
  • The one-month implied volatility metric – the market's expectation of how volatile bitcoin will be over the next 30 days – has risen from 48% to 64% with Sunday's price breakout.
  • However, longer-term price volatility expectations remain depressed.
  • Six-month implied volatility has registered a meager rise from 65% to 68% over the past three days and remains below the lifetime average of 76%.
  • Implied volatility has a positive impact on option probabilities: that is, when implied volatility rises, bitcoin is more likely to reach a certain level before a specific date.
  • Bitcoin's price is currently trading at $10,290, representing over 3% gains on the day.

Disclosure: The author holds no cryptocurrency at the time of writing.

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