Institutional traders are placing bullish bets on Bitcoin as they expect the cryptocurrency to trade between $75,000 and $100,000 by May
According to options market data, institutions traders believe the leading cryptocurrency’s price could continue its rally and reach $75,000 or higher by May. Bitcoin’s price has been trading around the $49,000 region for the past few hours, after losing 20% of its value to drop from an all-time high of $58,000 to $43,000 late last month.
However, institutional traders are now bullish on the cryptocurrency and predict it would continue with its record-breaking year. Swiss-based options analytics platform Laevitas confirmed this to CoinDesk in an interview yesterday.
Laevitas said, “On Monday, some block traders took bull call spreads at $75,000 and $100,000 strike call options expiring on May 28 via over-the-counter (OTC) trading and settlement desk Paradigm. These could be institutions betting that Bitcoin will hit at least $75,000 by summer”.
A bull call spread allows traders to buy call options below, above or the exact spot market price and then sell the equal number of calls at a higher stake price before the expiry date. The call option they buy gives the holder the right but not the obligation to purchase the underlying asset at a pre-agreed price on or before a certain date.
Yesterday, an institutional trader purchased 100 contracts of the May 28 expiry call option. The call options had a $75,000 strike price, and the trader proceeded to sell 100 contracts of the May 28 expiry call option at $100,000.
The institutional traders usually trade Bitcoin and other cryptocurrencies via over-the-counter (OTC) desks to avoid affecting the crypto spot market prices. Deribit usually executes, margins and clears the trades facilitated by Paradigm. Deribit and Paradigm are institutional-grade derivatives exchanges platforms.
The consensus is that the current cryptocurrency market rally differs from that of 2017, thanks to the entry of institutional investors and traders. Institutional investors are buying up bitcoins in the market and are also investing in other cryptocurrencies like Ether (ETH), Litecoin (LTC) and Polkadot (DOT).
The options market data shows that institutional investors remain optimistic that BTC would overcome the recent pullback and continue its rally over the coming months.