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Historic Bitcoin Price Rise: Unlikely

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At the moment, many are wondering if the predictions made about the price of Bitcoin at the beginning of the year are still correct. This is because, until now, all pre-existing conditions seem to have changed in one way or another. In order to answer this we must analyze the market, will Bitcoin reach a historic rise this year?

For now, the market seems to indicate a fairly low probability that Bitcoin’s historic price hike will happen. BTC is currently trading around $ 6,450, more than 200% less than the record of $ 20,000 in December 2017.

Will Bitcoin’s Historic Price Hike Happen?

At the moment, the market shows only a 4% chance that Bitcoin will exceed $ 20,000 before the end of 2020, according to data provided by Skew. This is a crypto derivatives analysis firm. In fact, the probabilities that prices will go to five digits, at the end of December, are also quite low.

Taking a deeper look, even the probability of Bitcoin ending the year above $ 10,000 is 16%. Then, exploring other options, we have the odds that prices will challenge the high of 13,880 USD in June 2019 for December are 8 to 10%.

Where do these estimates of Bitcoin’s price hike come from?

Specifically, Skew pulls estimates out of the options market. These options refer to derivative contracts that give buyers the right, but not the obligation, to buy or sell the underlying asset at a specified price on or before the specified date. This price is known as the strike price.

As for the method, the probabilities are calculated with the help of the Black-Scholes formula. It is based on key metrics that include call option prices, execution prices, the price of the underlying asset. Additionally, the “risk-free” interest rate of investments such as those of the United States Treasury and the expiration time of the options are considered.

What expectations do you currently have in the market?

Thanks to the fiscal and monetary measures of various governments worldwide, there are many analysts who maintain bullish expectations regarding the price of Bitcoin.

Odds that Bitcoin's price hike will exceed five digits by December this year. Source: Skew.
Odds that Bitcoin’s price hike will exceed five digits by December this year. Source: Skew.

The truth is that, these people consider that the possibility is still wide, and that the cryptocurrency may rally towards the historical maximums due to the macroeconomic backdrop. In other words, they trust liquidity to enter the market thanks to the measures taken to tackle the Coronavirus.

In order to get a real idea, JPMorgan has said that the stimuli are equivalent to 75% of world GDP. This only taking into account the measures of 22 countries, among which we have money printing and reduced interest rates.

Controversy regarding Bitcoin as a reserve asset

Lately, a wave of questions towards Bitcoin and cryptocurrencies in general has been awakened, as many consider that it is failing in the task of disassociating itself from the stock markets. They also allege that despite the stimuli that should theoretically drive it higher, Bitcoin remains low for what is expected.

However, there is still the possibility that Bitcoin may act as a hedge and shelter from the effects of macroeconomic policies that may encourage inflation.

What will happen to Halving? Can it still drive the rise in the price of Bitcoin?

As has been repeated since the end of last year, Bitcoin’s Halving is scheduled for May 2020. With this, the number of BTCs that come into circulation every 10 minutes is expected to be cut in half, from 12.5 to 6 , 25.

So far, this event keeps many optimists for the outcome it has had historically: growth of the price of cryptocurrencies in general.

However, once again, the prospects for a recovery before and after Bitcoin’s Halving are pretty low, according to options market data provided by Skew.

Final estimates

Although the probability that Bitcoin will stay above $ 6,000 until the end of April is over 50%, the odds that the prices will be 5 figures are only 4%, according to the data of the options.

Probability that the price of Bitcoin will be greater than 6000 USD at the end of April. Source: Skew.
Probability that the price of Bitcoin will be greater than 6000 USD at the end of April. Source: Skew.

To put the matter in perspective, just six weeks ago Bitcoin was very close to $ 10,500. But, the probability that this cryptocurrency will sell above 10,000 USD at the end of June is 12%, according to the data. At the end of September, the probability rises to 16%.

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