With the halving just six days away, the crypto community is collectively holding on to their proverbial hats and counting down the days until the historic event takes place. Looking back, its quite amazing to see what has been achieved in the past four years since the last halving and how much the industry has matured.
Regulation has taken giant leaps, venues have become more sophisticated and transparent, and institutions have begun to dip their toes in the once murky waters of crypto. Along with a reduced supply, all the conditions are perfectly aligned for a post-halving bull run, and that is exactly what many crypto enthusiasts are expecting.
One noticeable proponent of such a result for the halving is PlanB, the anonymous analyst behind the famous stock-to-flow model. Recently tweeting about the event, PlanB expects the Bitcoin price to rise tenfold in the next two years, thus proving that his model can indeed predict the long-term direction of BTCs price.
With the price of Bitcoin rallying ahead of the halving and the crypto community being generally optimistic about the upcoming event, others are taking a more sober stance on the price action following the halving, given all the hype surrounding the specific date being an event where people buy the rumor and sell the news.
As the price rises in the days leading to the halving, its possible that traders will take profits immediately after the event. So what to make of all this? Supply and demand is just one of the things to take into account, and it is, of course, the pillar on which long-term valuation stands, but short-term price volatility does not adhere to that logic, as fear, greed and other man-made factors come into play.
Derivatives data can be extremely insightful, as more complex instruments such as options contracts produce datasets that simply do not exist in the spot markets. As such, here is a closer look at the Bitcoin options data to shed some light on the situation.
Being a highly complex market, Bitcoin options market participants are often considered the most knowledgeable players, and the data sets produced by this complex market can shed a light on where these experienced traders think the price is headed post-halving.
For example, the implied volatility metric can tell a lot about the expected price of Bitcoin within the options market. When there is a higher premium for a certain strike price on an options contract, it means there is greater demand for these contracts. Data from the largest options market, Deribit, shows that options market players think the downside risk is higher than the potential upside.
However, this can also mean that traders are protecting their long positions on spot markets, including miners, who are inherently long on Bitcoin. Matt DSouza, CEO of Blockware mining, told Cointelegraph:
If Bitcoin is further adopted in, mining will likely be more commoditized and institutionalized which will reduce volatility in the price of Bitcoin. Present commodities like gold, oil or soybeans have large, institutional suppliers (Bitcoin miners are the present suppliers). In mature commodities like oil and gold these suppliers hedge their supplier which reduces volatility. This is just starting with Bitcoin. CME futures and options, Bakkt etc. so Bitcoin will mature and volatility will get reduced especially as more institutional players control the supply.
Looking at the historical data can give an even better insight of how the sentiment is changing with time. The chart below shows that puts are more expensive than calls, which can mean the market thinks the security has a greater chance of falling than it does of rising. However, the trend is starting to favor calls (the upside), so its important to keep an eye on how this trend progresses.
According to James Li, analyst at CryptoCompare, the current data favors a cautious outlook on Bitcoin, but that is changing rapidly. He told Cointelegraph:
With the recent rally, near terms expiries saw implied volatility picked up, whilst longer term expiries dropped. The 15th May contracts which expire right after the halving suggest prices can go both ways, with 25-delta only skewed very slightly to the put side, which means the demand is somewhat stronger on the downside. Longer term expiries, however, remain skewed on the put side but if we see persistent rallies, the sentiment can flip to the other side.
Another metric to keep an eye on in the Bitcoin options market is the put-call ratio, which has been increasing, rising from 0.62 to 0.70 in the last week. While a rising put-call ratio can be looked at as a bearish sign at first glance, it may also point to a risk-averse market. Bitcoin trader and popular YouTuber Tone Vays told Cointelegraph:
I think the majority of the people are wrong. A rising put/call ratio should be bullish for BTC price as most of those puts will expire worthless. Puts are also a good hedging (aka insurance) instrument so people that are hodling Bitcoin might be scared that mining will be in trouble and they are buying puts to protect their positions.
In fact, many advanced traders shared the same perspective as Vays, especially if the ratio goes too far in either direction. DSouza, who is also a hedge fund manager at Blockchain Opportunity Fund, shared a similar outlook on options, telling Cointelegraph:
A rising put to call means many investors are buying downside protection. I love it as a contrarian indicator. So when put/call gets extreme or greater than usual, I actually get bullish because I take a contrarian position. I like to do the opposite of the herd. This is most importantly, take the other side for the most part when the ratios go too far in either direction.
Although the options market and other metrics can give insight into what traders and other market players expect the BTC price to do, its interpretations should always be taken with a grain of salt. However, as Bitcoin continues to solidify its position as a new asset class, its classical volatility and unpredictability will continue to fade away.
Related: Institutional Investment Builds in Q1 2020, Sentiment Toward Crypto Funds Changing
In the meantime, its also important to take the elephant in the room into consideration that is, the COVID-19 pandemic and the massive wave of unemployment that has come with it. With this in mind, its possible that many will be hoping to cash out after the halving in search of safe haven assets.
Go here to see the original:
Here Are the Options: Bitcoin Derivatives Give BTC Halving Insight - Cointelegraph
- Nearly $60M in Bitcoin Moved to Ethereum in June - Yahoo Finance - July 9th, 2020
- ModiHost's Token Is Live on HitBTC, the Leading European Bitcoin Exchange | Press release - Bitcoin News - July 9th, 2020
- For The First Time It's Free To Hold Bitcoin In A Retirement Account - Introducing The No Annual Fee Choice IRA For Digital And Traditional Assets -... - July 9th, 2020
- Permissionless Software Foundation Aims to Foster Open-Source Software With Bitcoin Cash - Bitcoin News - July 9th, 2020
- Bitcoin Will Never Be Truly Private Says Andreas Antonopoulos - Cointelegraph - July 8th, 2020
- Forget Bitcoin and Cash ISAs! I'd buy cheap FTSE 100 shares now to beat the State Pension - Yahoo Finance UK - July 8th, 2020
- Ethereum, Bitcoin locked in DeFi hits all-time high of $2 billion - Decrypt - July 8th, 2020
- Nearly $60M in Bitcoin Moved to Ethereum in June - CoinDesk - CoinDesk - July 7th, 2020
- The Three Most Controversial Bitcoin Price Models and What They Predict - Cointelegraph - July 7th, 2020
- Trumps Former Sanctions Chief Joins Bitcoin Investigation Firm Advisory Board As Part Of Expanded $49 Million Investment - Forbes - July 7th, 2020
- Bitcoin Undo Button & Fleeing Firms: Bad Crypto News of the Week - Cointelegraph - July 7th, 2020
- Bitcoin Up 27% in First Half of 2020, Beating Gold, Silver and Platinum - CoinDesk - CoinDesk - July 7th, 2020
- The Popular Stablecoin Tether Is Now Circulating on the Bitcoin Cash Network - Bitcoin News - July 7th, 2020
- Demand for Bitcoin Will See a Dramatic Shift in 8 Years - Retail Investors to Eat up Entire New Supply | Economics - Bitcoin News - July 7th, 2020
- Breadwallet and Ledger Live Released Fixes for Flaws in Bitcoin Wallets - ResearchAndMarkets.com - Business Wire - July 7th, 2020
- Developer Reveals Layer-Two Private Messaging and Payment System on Bitcoin Cash | Technology - Bitcoin News - July 7th, 2020
- Equities Buoy Bitcoin, But Price Headwinds Are Unchanged - Forbes - July 7th, 2020
- Alleged scammers hid $14 million of stolen money in Bitcoin - Decrypt - July 7th, 2020
- Bitcoin As A Payment System Crypto Cards And The Rocky Road They Travel - Forbes - July 7th, 2020
- Bitcoin will hit $50,000 by the end of the year Nexo co-founder - Crypto News Flash - July 7th, 2020
- Crypto Derivatives Volumes Crash 36% to $393 Billion in June, a Low for 2020 | Markets and Prices - Bitcoin News - July 7th, 2020
- 20K Bitcoin Is Still On The Table - Futures Magazine - July 7th, 2020
- First Mover: The Return of the Bitcoin Retail Investor (And Why Thats a Good Thing) - CoinDesk - CoinDesk - June 30th, 2020
- The most secretive Bitcoin wallet just moved nearly $1 billion - Decrypt - June 30th, 2020
- Why the Stock-to-Flow Bitcoin Valuation Model Is Wrong - CoinDesk - CoinDesk - June 30th, 2020
- Why Bitcoin Will Take a Long Time to Dethrone the Dollar - CoinDesk - CoinDesk - June 30th, 2020
- Skeptics Concerned Plustoken Scammers Plan to Dump $187M Worth of Ethereum | Altcoins - Bitcoin News - June 30th, 2020
- Bitcoin.org Maintainer Calls for the Removal of Cobra, Website Owner Then Fires Him - Bitcoin News - June 30th, 2020
- An Israeli Blockchain Startup Claims Theyve Invented an Undo Button for Bitcoin Transactions - Cointelegraph - June 30th, 2020
- Bitcoin and Cardanos ADA Weekly Technical Analysis June 29th, 2020 - Yahoo Finance - June 30th, 2020
- Theory of Bitcoin: Essential knowledge from Craig Wright and Ryan X. Charles - CoinGeek - June 30th, 2020
- Bolstering Separation of Money and State Following the 244th Independence Day - Bitcoin News - June 30th, 2020
- Legendary Investor Jim Rogers Warns Governments Will Have To Eliminate Bitcoin - Forbes - June 27th, 2020
- What Changed My Mind About Bitcoin Narratives - CoinDesk - CoinDesk - June 27th, 2020
- The Last Time Volatility Was This Low Bitcoin Went On to Rally By $2K - CoinDesk - CoinDesk - June 27th, 2020
- Record Unemployment Has Contributed To A Striking Shift Toward Bitcoin, New Research Reveals - Forbes - June 27th, 2020
- Developer Who Successfully Hacked Bitcoin Wallet Ensures BTC Is Still Safe - Cointelegraph - June 27th, 2020
- What will happen to Bitcoin after all 21 million are mined? - Decrypt - June 27th, 2020
- Leveraged Tokens Soon Available on the Bitcoin.com Exchange | Promoted - Bitcoin News - June 27th, 2020
- Bitcoin mining farm buys up 17,600 minersdespite the halving - Decrypt - June 27th, 2020
- 6 Privacy-Enhancing Tools That Place Bitcoin Cash Transactions Ahead of the Pack | Privacy - Bitcoin News - June 27th, 2020
- Bitcoin Mining Chip Manufacturer Ebang to List on Nasdaq This Week - Bitcoin News - June 27th, 2020
- Bitcoin Suddenly Plunged To $8,900And It May Kickstart A 3-Month Correction - Forbes - June 16th, 2020
- Inactive Bitcoin Supply Reaches 4-Year High, Pointing to Bullish Sentiment - CoinDesk - CoinDesk - June 16th, 2020
- Crypto 101: How to Send and Receive Bitcoin Cash Via the Bitcoin.com Wallet | Featured - Bitcoin News - June 16th, 2020
- 6 Reasons Why 2020 Is a Great Year for Bitcoin - CoinDesk - CoinDesk - June 16th, 2020
- Currency wars: The rise of bitcoin - Opinion - Jakarta Post - June 16th, 2020
- Encrypted Messaging Site Privnote Cloned to Steal Bitcoin - CoinDesk - CoinDesk - June 16th, 2020
- Bitcoin is becoming more trustworthy than big banks, says survey - Decrypt - June 16th, 2020
- Bitcoin-Friendly Top US Banking Regulator Aims to Solve Banks' Problems With Decentralization | News - Bitcoin News - June 14th, 2020
- Developer Activity Surrounding Eos, Tron, and Bitcoin Cash Plummets - Cointelegraph - June 14th, 2020
- CryptoMixer.bz: Bitcoin Mixer for your anonymity in the Crypto World - Yahoo Finance - June 14th, 2020
- Facebooks Libra Stablecoin Project, Ethereum (ETH), Near, Bitcoin Cash are Currently Most Active Development Projects: Report - Crowdfund Insider - June 14th, 2020
- Is Bitcoin on the brink of a breakthrough? Or a crash? Same writer offers up two scenarios - Straight.com - June 14th, 2020
- Bitcoin Price Drop to Key $9K Support Could Place the Uptrend in Peril - Cointelegraph - June 13th, 2020
- Last Time This Key Statistic Hit All-Time High, Bitcoin Saw A 3900% Parabolic Rally - Forbes - June 13th, 2020
- Bitcoin Realized Cap Hits $106B Record as Fear Returns to BTC Index - Cointelegraph - June 13th, 2020
- Bitcoin's March to $100K: A Number of Crypto Experts Who Believe the Price per BTC Touches Six-Digits | Market Updates - Bitcoin News - June 13th, 2020
- Analyst predicts major correction in price of Bitcoin - Yahoo Finance - June 13th, 2020
- 3 Reasons Why Bitcoin Price Continues to Reject at $10,000 - Cointelegraph - June 13th, 2020
- COVID-19 And Jerome Powell Will Test Bitcoin's Resilience - Forbes - June 13th, 2020
- Bitcoin Is More Than an Inflation Hedge - CoinDesk - CoinDesk - June 13th, 2020
- 3 Reasons Bitcoin Price Could Be on the Verge of a New Uptrend - Cointelegraph - June 13th, 2020
- BTSE Exchange Offers Futures Contracts Tracking Tether Gold and Priced in Bitcoin - CoinDesk - CoinDesk - June 13th, 2020
- Bitcoin's Forks Have Trounced Bitcoin This Year - CoinDesk - CoinDesk - June 13th, 2020
- Bitfinex Hackers Move Another $4.1 Million Bitcoin in Their Biggest Pay Day Yet | Exchanges - Bitcoin News - June 13th, 2020
- Nightmare Come True: User Pays $2.6 Million in Transaction Fees to Send $134 of Ether | Altcoins - Bitcoin News - June 13th, 2020
- This bootstrapped startup built an eBay for Bitcoins and is heating up Indias crypto market - YourStory - June 13th, 2020
- Stocks, Safe Havens and Hodlers 5 Things to Eye in Bitcoin This Week - Cointelegraph - June 2nd, 2020
- The Bitcoin Trade Is Developing Well - RealMoney - TheStreet - June 2nd, 2020
- Bitcoin price could be on the cusp of major bullish breakout - IG Bank - June 2nd, 2020
- Bitcoin Rises Above $10K for First Time in 25 Days as Protests Roil US Cities - CoinDesk - CoinDesk - June 2nd, 2020
- JPMorganBitcoins Biggest EnemySuddenly Appears To Be Going All In On Crypto - Forbes - June 2nd, 2020
- Bitcoin Price Surges Above $10,000 Amid Unrest, Riots In USWill It Hold? - Forbes - June 2nd, 2020
- Bitcoin Rising, Satoshi Discoveries, & Google Enters the Race: Bad Crypto News of the Week - Cointelegraph - June 2nd, 2020
- The Last Time This Happened, Bitcoin Surged From $3,150 to $14,000 - Cointelegraph - June 2nd, 2020
- Bitcoins $100K Probability Speculation or Economic Theory Backed? - Finance Magnates - June 2nd, 2020
- On the 'Bitcoin Fixes This' Meme - CoinDesk - CoinDesk - June 2nd, 2020
- Reddcoin (RDD) Nears PoSV v2 Activation, Clearing Way for Explosive Developments | Press release - Bitcoin News - June 2nd, 2020
- With Riots Erupting in US Cities, Using Tools of Peaceful Protest Can be More Meaningful - Bitcoin News - June 2nd, 2020