TL;DR
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In a very small nutshell, ‘Options’ give investors the right to buy or sell an asset (like BTC) for a set price, at a later date.
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That investor could make a deal with a broker, put down the premium, and when (IF) it hits $30k, they could buy their BTC at the $29,150 price instead of $30k. Say the price doesn’t go up to $30k, the Option may expire, in which case the investor would lose that premium they’d put down.
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The investors who placed the above bet, instead of letting their options expire (resulting in losing their Premium), they’re staying strong, and waiting until the price pops back up to $30k (which they believe will happen soon).
Full Story
Time for some good old-fashioned guesswork about BTC’s next price movements (based on some hard-to-argue-against facts about current investor behavior).
Right! So we’ve heard a ton about ‘Options Trading’ in the past, but never had a deep understanding of what that really meant.
Turns out, it’s pretty dang simple!
In a very small nutshell, ‘Options’ give investors the right to buy or sell an asset (like BTC) for a set price, at a later date.
To get this privilege, they pay a ‘Premium,’ which can be thought of like a non-refundable deposit.
Here’s a theoretical scenario:
1 BTC is priced at somewhere around $29,150 USD at the time of writing.
Say an investor believes that it’s going to hit $30k again, in the next 2 weeks.
That investor could make a deal with a broker, put down the premium, and when (IF) it hits $30k, they could buy their BTC at the $29,150 price instead of $30k.
Say the price doesn’t go up to $30k, the Option may expire, in which case the investor would lose that premium they’d put down.
“Cool story, nerds, why should we care?”
So that theoretical scenario 👆- we lied, it ain’t theoretical.
According to Rachel Lin, CEO of derivatives DEX, SynFutures:
“Despite bitcoin’s fall below $30,000, [we’ve seen] a conspicuous lack of $30,000 call [Option] selling from bearish traders. This suggests they don’t foresee the $30,000 level transforming into significant resistance, at least in the near term.”
In other words, the investors who placed the above bet, instead of letting their options expire (resulting in losing their Premium), they’re staying strong, and waiting until the price pops back up to $30k (which they believe will happen soon).
As always, this isn’t financial advice – please DYOR.
But we will say it’s promising news 🙂