Options Market Suggest Just 4% Chance of Bitcoin Breaking All-Time High in 2020

Options Market Suggest Just 4% Chance of Bitcoin Breaking ATH in 2020

Many analysts suggest that the upcoming Bitcoin halving could bring the premier cryptocurrency to new heights. However, recent data from the crypto options market is now indicating that the chances for this are currently slim. In fact, the market chances that Bitcoin will reach an all-time high in 2020 are just 4%.

Options data says there’s a 4% chance Bitcoin will reach $20,000

This new insight comes from recent options market data, from the crypto derivatives analytics firm Skew. Specifically, the firm uses statistics from the crypto options market in determining the probability for different price levels.

Options are essentially derivatives contracts that enable buyers to purchase or sell a certain underlying asset at a specific price. Options have an end-date and are, therefore, a good gauge of future buying sentiment. 

At the same time, options do – unlike some other financial instruments – not mean potential buyers have an obligation to buy the underlying asset at the end-date. As the name suggests, Bitcoin options are options with Bitcoin as the underpinning asset.

However, one should keep in mind that extrapolating data from the options market comes with relatively low confidence. Nevertheless, the data provides an interesting view over current and future investor sentiment. This is why Skew is compiling crypto option metrics.

Will Bitcoin surge past $20,000 anyway?

According to one model, Skew rates the probability of Bitcoin crossing $20,000 this year as quite low. The following chart depicts the dropping probability of Bitcoin being “above $X per maturity”. The relevant maturity date here, or end date, is December of this year. 

The chart clearly shows there is a gradual drop-off in the probability of a high Bitcoin price by December. In fact, the probability that Bitcoin will surge past its all-time high of $20,000 by December is just 4%. 

With that said, however, there appears to be some inconsistencies in the data. Most crypto observers would agree that a 40% probability that Bitcoin’s price will be over $5,000 by December, which the model also suggests, would be too low.

Moreover, there are currently a myriad of bullish signs for the second half of 2020. The Bitcoin halving, along with the Federal Reserve’s “QE infinity” project to print US dollars could drive Bitcoin’s price higher.

As such, one should likely take this projection with a pinch of salt. However, it is interesting to see a data-driven projection for the end-of-year price of Bitcoin. What’s more, it will also be interesting to see how accurate it ends up being.