Open positions on Bitcoin options have reportedly surpassed $1 billion for the first time. Erstwhile, Bitcoin itself has been pumping hard in the lead-up to the recent halvening. All of this in the midst of an apparent “pandemic.”
Options Market Spells Bullish Future
It doesn’t actually matter if people are betting for or against Bitcoin in these options contracts. Most traders, of course, are doing both. That’s how they make their money, even shorting Bitcoin. Shorting BTC for the long haul is almost certainly a fool’s errand, but momentary lapses in the market are to be expected.
What it amounts to, when the BTC market tanks, is traders getting discount coins from miners and weak hands. Piles get consolidated, the market rebounds, and the cycle repeats. The question at the moment, of course, is whether we’re on the way to $20,000 within sight. If recent bull movements are any indication, $12-15,000 can be expected.
Bitcoin as a whole is recovering quicker from the coronavirus impact than the stock market seems to be. While the market has rebounded despite record joblessness and the likelihood of widespread foreclosures and other types of debt-based problems, Bitcoin is surging. The data shows that while Bitcoin may react similarly to the stock market when there are major problems like a pandemic, it rebounds and grows faster, and sticks to its principals.
A huge driving factor in BTC’s recent growth is the halvening that took place on May 12th. The inflation of Bitcoin, or new coins entering the system, has been cut in half. As such, the perceived value of marketable BTC has increased, but don’t expect it to double right away. Not necessarily. The market just doesn’t work that way.
Suits, Saviors, and Traders
The real news for Bitcoin in the wake of the coronavirus dip is that the suits have arrived, and they wield mighty influence. In a panic, they can tank the market at the ready, without much difficulty, owning enough coin to do so.
Likewise, long-term “hodlers” wield impressive influence in the space, as I’ve written about before. These people are able to hold up the price of Bitcoin simply by not selling any, lowering the volume of coins that entering the market. If this group were to grow enough, it could come to out-influence the continually growing group who are responsible for things like a ballooning options market.
Traders, meanwhile, just ride the waves. At this point, it’s as if there are a few major forces, and then a group of independents in the middle who make money in both directions. The Bitcoin market is highly suspect as a whole, with up to 95% of its volume being faked. If we derive our price figures from the other 5%, it’s still hard to be sure. This is a problem unique to handling digital money, as things are quickly compromised, hacked, abused, and altered every day.
More BTC derivative markets are likely to emerge. For now, people are opening positions in options markets. With the cryptocurrency performing so well recently, the bears have begun to get hungry.
A strong options market, combined with other products that are sure to be launched in the future (beyond things like the Grasycale Bitcoin Trust or GBTC), means that interest in Bitcoin is good. It may not indicate when or if we should expect real-world adoption (beyond financial instruments) of crypto, but it does tell us that an incredible number of people are willing to put their money where their mouth is.