An unknown trader or group of traders has placed a million-dollar bet
that the bitcoin price will reach $50,000 by the end of 2018.
As first reported by The Wall Street Journal,
tradingdata from LedgerX — the first U.S. exchange to list bitcoin
derivatives — shows that an unidentified trader or group of traders paid
$990,000 for the right to purchase up to 275 bitcoins in 2018 — at a
price of $50,000 each.
The bet was made using a call option, a contract that allows the
buyer to purchase an asset at a particular price on or before a specific
date, no matter what the current marketprice is. In this case, the
buyer or buyers paid an average of $3,600 per bitcoin — a fee roughly
equivalent to one-fifth of a bitcoin at today’s exchange rate — to lock
in a price of $50,000 until Dec. 28, 2018. If the trader exercises the
full value of that option, they will have to pay $13,750,000, bringing
the full value of their investment to nearly $15 million.
Although the trader remains unidentified, LedgerX CEO Paul Chou hinted that the bet was indicative of rising interest from institutional investors, many of whom remained on the sidelines due to the lack of robust bitcoin derivatives markets on regulated exchanges.
“Without a doubt, there are institutions out there that
are looking at these types of trades or have done these types of
trades,” Mr. Chou told the Journal. “It’s not an individual, let’s put
it that way.”
The bet is incredibly bullish, indicating that the trader believes
there is a significant chance the bitcoin price will continue its
meteoric trend into the new year, even as bitcoin bulls like Pantera
Capital’s Dan Morehead warn that a bear market may lie on the horizon.
Just to break even, the bitcoin price will need to reach $53,600 —
plus the cost of tradingfees, representing an increase of approximately
320 percent from its current value of $16,764, according to the CCN Bitcoin Price Index.
This means that, effectively, the bitcoin price could triple over the
next year and the buyer would still lose money on the trade.
However, if the bitcoin price does manage to replicate this year’s
unprecedented performance in 2018, it could prove to be the trade of a
Write to Josiah Wilmoth at josiah.wilmoth(at)cryptocoinsnews.com.
Featured image from Shutterstock.