Odds of Bitcoin Hitting Record High in 2020 Are (Slightly) Up, Options Data Suggests
The likelihood of bitcoin challenging 2017's record high by the end of this year may have just nudged up – but don't raise your hopes too high just yet.
Jul 27, 2020 at 1:16 p.m. UTCUpdated Sep 14, 2021 at 9:36 a.m. UTC
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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.
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- 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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