Managing Director Alexander S. Blum was recently on Coindesk TV – All About Bitcoin with Christine Lee. Together they reviewed recent Bitcoin price action, PayPal news, and what his end-of-the-year price prediction is.
Below are some of the highlights from the interview
What do you see influencing Bitcoin’s price near term?
I think there’s a combination of factors. At Two Prime, we focus on the derivatives markets and use options to provide downside protection for our investor base basically.
And so a big part of what we see has happened is a massive amount of options expiring at the end of March, $6 billion, the most ever.
And we also see different behavior in the options markets with more people buying puts, which tends to be more of an institutional risk-averse buying behavior.
And so, as we see more institutions enter into the fray, we’re also seeing a mix-up of how people are using options to protect their positions.
And what this also leads to is different behavior in the underlying spot price. We saw a sort of a depression in the price because more put interest was available and bought during March.
Those options expire, and we’ve seen a subsequent run-up in the price. I expect over time that what we’re seeing is sort of an evening out of realized volatility and a reduction in the curve.
The growth curve, it’s still massive and exponential. But if you look at historic rates growing a little bit more slowly, still phenomenal. And so, this kind of consolidation phase, to me, is a healthy part of a sustainable and robust market with institutions starting to participate.
So are we due for a Bitcoin breakout?
Yeah, so, you know, if you look at macro factors and on0-chain data, how much Bitcoin and Ethereum are available on exchanges, they all point to the price going up a lot and soon!
We have the banks’ SLR expiration with a bunch of money between that and the stimulus bills being passed that need to go somewhere.
I think it’s kind of risky to look at one kind of single data point on options and say that’s some bullish or bearish indicator because for us, for example, we buy puts and calls, and we sell puts and calls.
And when we’re buying them as part of a larger picture for us depending on how our books look. And so there may be a bunch of $80,000 calls bought, but I wouldn’t look at just that as the only indicator that things are going to move upwards.
The options markets and crypto are pretty small at just over a billion dollars in daily volume. And so you can have a few outsized positions from a few investors that think it’s going to $80,000 that could give you all this data.
That might be a false signal. But that being said, things look pretty bullish for Bitcoin in the short to medium term.
What’s your long-term view on Bitcoin by the end of the year? Do you have a price target?
If we look at the halving cycle, which I think is the most accurate predictor of price to date, we’re about 10 months into it since the last halving, which traditionally lasts 14 to 18 months, which would put us right around the peak In September, October of this year.
If it follows historical indicators, we’re trending between 2012 and 2016, halving and looking at a trajectory of around 16x.
That should put us somewhere around $250,000, then a big crash probably by the end of the year.
What’s the significance of PayPal accepting Bitcoin?
So I think there are two aspects to it; I think there’s, you know, the actual utility of it that, OK, you’ve got more buyers and sellers using Bitcoin and some other leading cryptocurrencies to make transactions.
I think that that’s probably not going to be so significant. I think most people use Bitcoin as a speculative and investable asset, more akin to gold. I know certainly; I’m not trying to buy my coffee or my t-shirts online using my Bitcoin.
It’s pretty precious to me. And so I think that part I don’t know. I don’t know how significant they’ll be. But obviously, Bitcoin is a massive network of users, and I think over 300 million. And so just the creation of awareness, the endorsement from a large institution in the financial realm of giving this a mark of legitimacy certainly will have its own effects.
And, you know, I’m not sure maybe there’s also an aspect of people needing to provide something beyond just an investable asset on their platform since it’s a little bit outside of their typical scope.
And so I’m not sure if that provides them with a regulatory cover or some nascent business opportunity. But I think most people are buying and holding Bitcoin to make money. Now we have to wrap up.
Just before the end of the show, Christine also highlighted a recent Tweet.
— Alexander S. Blum (@alexandersblum) March 30, 2021
If people are confusing Satoshis with Scaramucci’s, are we still early?