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People writing those article should know better, it's the wall street journal for god's sake. Buying a call option doesn't mean you're bullish that the future is going to trade up to that point. It could be a hedge for a short position or a way to go gamma-long or a way to make a structure cost-less, or really some other trading idea.
The point is that if the price goes up, the call option price goes up faster, and then the trader can sell it before it reaches 50k. Liquidity though may be an issue.
EDIT: what matters is that it is _possible_ that bitcoin goes to 50k next year. And since it is possible, people need to take that possibility into account in their strategies. It's like S&P option strike range for dec18, it goes from 1700 to 3100. Is it likely that SP price goes down to 1700 in the next year? no, but it's certainly possible.
A call option also means someones else took the other side of this trade. Who sold $1 million dollars worth of December 2018 Bitcoin $50K call options?
Also there's a back of the envelope implied volatility for Bitcoin here: on a $3k call option premium 12 months out (so breakeven on this "bet" is actually $53,000) Bitcoin implied volatility of around 120%? Not that equity option pricing model theories apply to Bitcoin, or even work as expected on equities for that matter, but it's interesting to see an implied volatility number regardless. Looks like Delta less than 10. With Futures already 3 months out at $17,000 it would seem like whoever sold this call option for $1 million could hedge (not perfectly hedge) the trade for less than $1 million. Oddly enough, both the buyer and the seller could end up profiting on this option trade.
I agree this article is very bad, it feels like a paid PR article advertising for the trading company not actual news.
Someone who's already long a ton of bitcoin could write those calls without adding any risk, collecting a little bit of yield and sacrificing only the extremely-far-out-of-the-money potential upside of $50k+ on his long bitcoin.
The implied volatility at which this option traded is pretty irrelevant for helping us understand the option market as a whole, since it's so far out of the money. We don't have much information about what the upside skew would look like. And due to vanna, that delta calculated off that implied volatility is irrelevant too.
> I agree this article is very bad, it feels like a paid PR article advertising for the trading company not actual news.
The number of times LedgerX was mentioned made me suspect that immediately.
Though to be fair, going long a call is fundamentally a long delta (=bullish) trade on the stock (unless you hedge, in which case it's long vol)
You are right. its most likely a exotic call option.
Click bait!
WSJ is owned by Rupert Murdoch now. https://en.m.wikipedia.org/wiki/The_Wall_Street_Journal
A single call creates yet another far-fetched mass media piece to convince unsuspecting fools to spend their money pumping up the bubble.
And so the pumping continues.
The more far-fetched the story, the closer the burst is.
$50k is not really that far fetched... Bitcoin tripled in value so many times already, what's one more time?
Yeah, no one can accurately predict market futures. It's probably only absurd in retrospect if it doesn't come true. But there's no math that says it's unrealistic, especially with faith based currency.
They paid $1m for an option for 275 BTC@$50,000.
That seems quite expensive... if the price goes anywhere near $50,000 the emitting party could aquire those 275 BTC for less than $50,000 each and wait until the options expire.. am i missing something?
Bitcoin is currently not what Bitcoin was when it was created.
Slow peer-to-peer transactions High processing fees
Average fees are approaching 40 dollars. That's an average. Unconfirmed transactions are at an ATH of 260k... has been at over 100k for weeks. The mempool is also at an ATH. The Bitcoin is crippled and nothing more than a "store of value". Sentences like "store of value" are now the term used to describe Bitcoin. Very far from what the Bitcoin used to be.
I think there is a real possibility of a "death spiral of the blockchain". Fees will increase and it will become impossible to move coins on the blockchain besides the upper 10% of bitcoin holders.
The fork that occurred on 1st August created Bitcoin Cash. This fork is much closer to what the Bitcoin was. Bitcoin Cash is this today. Removal of the segwit code (which hasn't solved anything), disabling of RBF (replace-by-fees) enabling 0-confirmation transactions again. A new DAA (difficulty adjustment algorithm). Finally increase the block size to 8MiB.
The Bitcoin has been crippled on purpose by Blockstream deep in the pockets of bankers and insurance companies. Blockstream is the main contributor to the Bitcoin development. Look at the sponsors; https://www.blockstream.com/about/#investors
Before the bankers, and their followers, got indirectly involved in Bitcoin development there never was any discussion about limiting the block size to 1MiB; in fact the opposite was discussed. See; https://twitter.com/adam3us/status/636410827969421312?lang=e... https://bitcointalk.org/index.php?topic=1314.msg15143#msg151... https://np.reddit.com/r/btc/comments/71h884/pieter_wuille_im...
Now all of this has led to a complete divide and clusterfuck of the community. It is an very ugly and toxic environment and is sad to look at. On top of that we now have thousands of alternative coins and blockchains.
Just my 2 cents ;) Happy Christmas and new year to all!
> Unconfirmed transactions are at an ATH of 260k... has been at over 100k for weeks.
Statistics like these should be more prominent in the argumentation. Regardless of any technical discussion of the merits of SegWit vs. big blocks, there isn't any doubt in the usability of the system as is compared to as before.
Honestly at this point nobody can really make predictions for the short or medium term. There's not much in the way of underlying use of BTC as anything but a gamble here, and the tech enthusiasts/crypto-libertarians have been massively outnumbered by the bandwagoneers and FOMO.
The Bitcoin bubble could explode tomorrow or next year or just possibly it could find a way to become self sustaining (seems unlikely). It could repeat the crash-peak-crash pattern. It could do anything and analysis seems essentially pointless.
This looks like an uninformed ad for LedgerX.
For god's sake, no one in their right mind trades naked options - neither the seller nor the buyer. Given the historical volaitity of bitcoin rising from 1000 to 16000, it shouldn't be surprising at all that someone wants to hedge (a concept which seems alien to the writers) their positions.
The missing information is - what premium did it cost to secure the trade? Well, as per the data ~ $3600, which at current price is nearly 20% of the current price. Very costly premium for a very volatile product.
> no one in their right mind
Remember, we're talking about the same market and investors that brought us Dentacoin and Wu-Tang Coin.
uh -- who does naked options at ledgerx?
and yes, the data says 3600 for the call, which is the definition of a premium. nothing missing, guys. seriously. do more thinking before you post.
seriously no joke, I am the CEO there, former trader at Goldman so I sort of know what I am talking about with this type of stuff. You guys do not. It's hilarious to watch this conversation.
I'm curious about how people's arguing about Bitcoin's prospects correlates with their cryptocurrency holdings.
I'm highly sceptical about the entire cryptocurrency space, due to the weirdly gold-standard like underpinnings of most of the currencies. I don't like the idea of deflationary currency. I don't like the idea of decentralised currency; I think central banks play a useful role, even if they don't always do it well. I don't think BTC is a good payment mechanism because it requires exchange at each end, long confirmation times and burning a ton of energy. I don't consider putting money into cryptocurrency 'investment' because it's not like putting money into a company or venture - you're just buying a virtual asset to sit on it. I think a lot of the programmable stuff around ethereum is an overhyped solution looking for a problem, most/all ICOs are scams and a whole host of other negative things about the entire sector.
That all said, I got curious and started mining with my gaming machines, and apparently I now have around $1K in various cryptocurrencies (half an ether, half a ZEC, some SIA, some ETN, a tiny piece of a monero, a few other little bits and pieces). The only money I've put in is through the electricity bill. I may find a way to cash out eventually, but at the moment I'm just going to hang on to it all and see where it is a year down the line. I don't believe in any of it - but I know other people do so there might be an opportunity to make some money.
I personally don't believe in BTC's future in terms of tech. It has already played its hand - see the entire crypto space - so I'm under no illusion about its limited potential (in its current form). However, it has made me a fair bit of money, and I feel that it could possibly still make me more in the short term. I've already withdrawn my initial investment and the capital I'm using to explore this space is basically "profit" from those same initial investments so whatever I lose is basically only opportunity costs.
Is it possible to rationally manipulate and speculate using bitcoin or do you have to be
a believer?
Two year Bitcoin volume when measured in BTC seems relatively stable while the price goes up and up and new speculators come in. As long as the price goes up the same pace as demand, there is no upper limit to the price level that steady supply of bitcoin can support.
At the same time the market gets thinner and thinner relative to the bitcoin wealth. At some point the social mania around bitcoin peaks and speculators want to liquidate more than there is buyers.
Is this really a risky bet? I wouldn't be surprised if we hit $50k within a few months.
I don't consider that a risky bet, although I probably wouldn't have gone so high of a strike price, but high implied volatility does that to people.
Either way, they can sell from month options to finance the cost of their back month speculation, bringing their cost basis to zero or even less.
Now they would have a free trade that still has the whole upside potential, even better than a lottery ticket.
And finally, if it doesn't look like the bet is going to pay off within the last 3 - 6 months, they can rollover the long contract into the December 2019 options, mostly financing the purchase of the new long dated contract.
Options allow you to control risk, which is why it isn't inherently a risky bet.
If I understood correctly the article, the bet expires this month so if by Jan 1st price hasn't hit the mark, he loses?
So if you "thought" that Bitcoin will go over $50k - why not buy the Bitcoin itself now at $20k (or whatever it is today)? i.e. what is gained with the call option here?
Let's say you have $20k to invest and you're convinced Bitcoin will be $60k in one year. If you buy bitcoin for $20k and sell in a year for $60k, you've made $40k profit.
If on the other hand you buy 10 $50k call options at $2k each then if Bitcoin hits $60k you'll get ($60k-$50k)*10 or $80k profit ($100k - $20k initial investment). Basically you're doubled your profits without increasing your investment.
On the flip side if Bitcoin 'only' hits $40k, you'll have lost $20k if you bought the call (since calls are worthless if the asset doesn't reach the target price), but made $20k if you'd bought the bitcoin.
Basically calls allow you to take bigger bets with less money up front.
You're assuming that it's naked (in the technical sense) speculation.
If they're covering a short position then this is just akin to insurance to limit the downside. Entirely sensible and the reason why they were invented in the first place.
Leverage
Bitcoin is the new diamond, perhaps even more unethical and irrational.
Fair.
People forget about the drugs, guns and human-trafficking that built Bitcoin.
It may have started as a response to the corruption in the banking system, but that's not how it got to where it is now.
What does a cryptocurrency has to do with ethics?
while I could agree that bitcoins are forever, I can't imagine putting one on a ring ... except maybe a NFC Ring[0].
Somebody bought these options. That person is betting that Bitcoin will go over $50k next year.
Somebody also sold these options. That person is betting that Bitcoin will NOT go over $50k next year.
a bet... placed by a Bitcoin millionaire, to make the crypto-currency frenzies buy some more Bitcoin?
Okay ... options discussed on a tech forum. The next crash can't be far away ...
Can bitcoin be "damaged" by quantum computers?
Yes, a quantum computer with a few hundred error-corrected qubits (many more before error correction) would clean out all addresses with exposed public keys, by solving Elliptic Curve Discrete Log to recover the private key.
This includes many old addresses that didn't hash the public key, any re-used addresses, and, using replace by fee, even all new addresses in the time frame between broadcasting a spend transaction and that transaction being included in a block (which can currently take many hours).
This is an interesting question to me, because I know little to nothing about the cryptography involved with cryptocurrencies.
1) What's the probability of the cryptographic ciphers behind cryptocurrencies being broken?
2) If they were broken, is it possible to 'move' BTC or other coins to a new cipher?
I apologize if I'm using the 'cipher' terminology incorrectly.
As far as I’m aware, hash algos like SHA or Scrypt are not the type of math that quantum computing threatens.
Paywalled. How do I read the whole story?
Here is an archive of the article:
Go to the page, then click this bookmarklet
javascript:window.location="https://m.facebook.com/l.php?u="+encodeURIComponent(window.l...;
copy URL, paste in facebook search bar, enter, and pick any link that's been shared.
That's more like a billion-dollar bet. Ask the Winklevoss twins.