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, trading data 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 market price 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 trading fees, 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 lifetime.
The risk of loss in the trading of stocks, options, futures, forex, foreign equities, and bonds can be substantial and is not suitable for all investors. Trading on margin or the use of leverage is not suitable for all investors and losses exceeding your initial deposit is possible. Supporting documentation is available upon request. Trading futures, options on futures, and forex involves substantial risk of loss and is not suitable for all investors. Carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources and only risk capital should be used. Opinions, market data, and recommendations are subject to change at any time. The lower the margin used the higher the leverage and therefore increases your risk. Past performance is not necessarily indicative of future results.