Market Wrap: Bitcoin Nears $29K While Ether Options Trader Makes Long-Shot Bet

The Takeaway:

Another day, another all-time high in bitcoin as the cryptocurrency changed hands as high as $28,969.90, according to data compiled by the CoinDesk 20.

Bitcoin's price began its upswing at around 17:00 UTC (12:00 p.m. ET) Tuesday and barely let up, taking off from $26,400 to the brink of $29,000 in just 26 hours.

According to analyst Alex Krüger, action in the bond market spurred gains in cryptocurrencies. "Rates came off in the 48 hours leading to yesterday's [Tuesday's] pump," he told CoinDesk. On Monday, the U.S. 10-year bond yielded 0.950%. By Wednesday afternoon, it was 0.926%.

Calling Wednesday's action a "strong market," Chris Thomas, head of digital asset at Swissquote, said bitcoin's price was "being pushed higher by retail flows. We have seen a few [institutional investors] but not too many," adding that "most are on holiday until next Monday."

And while Thomas said he had expected the market to trade sideway this week, "the fact that it has moved higher to me suggests we may see a short-term pullback," he said.

Read more: Bitcoin Prices in 2020: Here’s What Happened

"Bitcoin is extending its parabolic uptrend after gapping up at the start of the holiday week," said technical analyst Katie Stockton, managing partner at Fairlead Strategies. "The rally has no new signs of exhaustion from an overbought/oversold perspective, and there is no resistance left to hold back bitcoin."

Similar to Swissquote's Thomas, Stockton warns a pullback is possible and, should it happen, "the gap from Monday is likely to be filled in an abrupt reversal."

Meanwhile, a string of bad news hit XRP as more exchanges announced halts in trading the cryptocurrency U.S. regulators claim is a security. Genesis, owned by CoinDesk parent company DCG, announced it was suspending trading and lending in XRP. Cryptocurrency exchange Binance is also suspending XRP trading for its customers, effective Jan. 13. The token was down 3.5% in the 24 hours leading up to publication time.

Ether, the second-largest cryptocurrency by market capitalization, was up sharply Friday and trading around $750. That marks a 3.5% gain in 24 hours as of 21:00 UTC (4:00 p.m. ET).

Despite hitting a multi-year high, trading on ether was lighter than average Wednesday. Just $618 million worth of ether was traded on the eight exchanges tracked in the CoinDesk 20 compared to the previous seven-day average of $726 million. 

Yet, at least one trader has sights set on an astounding rally in the months ahead. On Deribit, the largest crypto options exchange, someone bought 153 contracts of September 2021 calls with a strike of $5,000 for a premium of around $25 each. That means the trader bet roughly $3,825 that ether will rally sevenfold over the course of the next nine months. Calls give the owner the right, but not obligation, to buy the underlying asset (in this case, ether) at a set price on a set date. 

Prices need not come close to $5,000 for the trader to make a profit; a mere spike in volatility or even a relatively modest rally could increase the now-low probability of the options being in the money, albeit by a very small percentage. Still, that could be just enough for the bet to pay off. As of now, though, it has the same risk profile of a lottery scratch-off game.

Digital assets on the CoinDesk 20 were mixed Monday.

Notable winners as of 21:00 UTC (4:00 p.m. ET): 

Notable losers: 

Equity indexes: 

Commodities: 

Treasurys: