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Institutional traders are betting that Bitcoin will rise to $79,300 by the end of November. This bullish sentiment is evident in recent trading activity on the Chicago Mercantile Exchange (CME), where Bitcoin options saw some of the highest trading volumes ahead of the US presidential election.
Will Bitcoin rise above $79,300?
Joshua Lim, co-founder of Arbelos Markets – a trading firm that provides liquidity across cryptocurrency derivatives markets –subscriber Insights on X on these notable deals. “CME Bitcoin Options saw some of its biggest volume days ever, ahead of the US election,” Lim said.
He highlighted two major deals that occurred last week. On Friday the 25th, traders bought 1,875 BTC units of the $70,000 strike calls from November 29th to November 29th. In options trading, a call option gives the buyer the right, but not the obligation, to buy an asset at a specified strike price before the option expires. In this case, the strike price is $70,000, which means buyers are betting that Bitcoin will surpass this price by the end of November. At the time of trading, “$8.3 million in premiums, $147,000 from Vega, and $65 million from Delta had been paid,” Lim explained.
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Then, on Tuesday the 29th, another significant trade occurred with the purchase of 3,050 BTC units of $85,000 strike calls on November 29th, with the strike price at $85,000. “$4.6 million in premiums, $173,000 from Vega, and $42 million from Delta had been paid” at the time of trading, Lim noted.
The amounts of $8.3 million and $4.6 million indicate a significant investment, reflecting strong confidence in Bitcoin’s potential upside. A high Vega indicates that traders are anticipating high volatility, which could be massive around the US elections. Delta represents the amount of expected change in the price of an option with a $1 change in the price of the underlying asset. High delta values of $65 million and $42 million indicate significant exposure to Bitcoin price movements.
The total notional value of these positions – the total value of the underlying assets represented by the options – is approximately $350 million. This is “big even in the context of Deribit,” Lim noted, referring to the world’s largest cryptocurrency options exchange.
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The break-even point for these positions is just under $79,300. This means that for traders to start making a profit, the price of Bitcoin must exceed this level by the option expiration date. This price represents an increase of approximately 16% over the price of Bitcoin when these trades were executed.
“It’s very bullish going into the election, and it’s great to see institutions expanding at this scale on the CME,” Lim commented. He added: “It is perhaps a good sign that there is increasing liquidity in cryptocurrency derivatives markets as the asset class matures.”
The timing of these deals is particularly noteworthy. As the US presidential election approaches, market volatility is expected to increase, which could impact the entire Bitcoin and cryptocurrency market. Overall, the majority of experts believe that a Trump win is bullish for the Bitcoin price.
At press time, Bitcoin was trading at $72,382.
Featured image created with DALL.E, a chart from TradingView.com