Bitcoin Options Market Shows Halving Is Not Priced In: Skew

[vennali]

London-based crypto research company Skew has attempted to answer the big question about the forthcoming Bitcoin halving. According to the company's research, not all values of future volatility has been priced in, contrary to what numerous critics say. Read more HERE

PS: I could have copy pasted the whole article, but that would be like stealing somebody else's work. Cheers!

[franky1]

for bitcoin halving to be priced in the market price would need to be at double of mining cost.

obviously

this is because if hashrate continues at same level then with half as many coins awarded the value of the coins would need to double to cover the mining cost.

right now the cost of mining vs bitcoin price is not at a double

the most efficent mining cost is about $6500 and the market price is not that far above.
if the market price was say ~$13k+ then yes the halving would have been 'priced in' but that is not the case.

as the halving gets closer, a few possible things can happen
mining hardware cost/efficiency gets better(lower cost) to compensate
hashrate declines and those remaining get more slice of the reward pie to compensate
market price increases to compensate

[vennali]

for bitcoin halving to be priced in the market price would need to be at double of mining cost.

obviously

this is because if hashrate continues at same level then with half as many coins awarded the value of the coins would need to double to cover the mining cost.

right now the cost of mining vs bitcoin price is not at a double

the most efficent mining cost is about $6500 and the market price is not that far above.
if the market price was say ~$13k+ then yes the halving would have been 'priced in' but that is not the case.

as the halving gets closer, a few possible things can happen
mining hardware cost/efficiency gets better(lower cost) to compensate
hashrate declines and those remaining get more slice of the reward pie to compensate
market price increases to compensate

Well, its almost given that the efficiency of the hardware isnt going to drastically change, for many reasons. There's still along way to go before halving and 13k+ is a possibility. At the moment, Hash-rate is reaching all time highs so, that isnt an issue either. Everything is signalling a bullish Bitcoin and a great time to trade Options but lets see how things go. 

[adaseb]

For Bitcoin options I tend to look at,
https://www.deribit.com/main#/options?tab=all

And going into the halving I look at the March and June expiry contracts. From what I can see, there has been lots of volume lately with the $8000 and $9000 calls. You can see this by looking at the open interest which is around 1300-1400 contracts. There is even more at the $12000 and $16000 calls with over 1700 and 1600 contracts respectively.

So you can see that many people are betting that the halving will have a positive effect. Basically at the very least around the March expiry we should see $9000 and at best maybe $12500 or $16300 or so.

Keep in mind this isn't always accurate, 2 months ago there was tons of open interest for the $10K and $11K calls which were to expire on Dec 27 2019, which meant price would touch $11K-$12K one more time before the new year and that never happened.

[vennali]

For Bitcoin options I tend to look at,
https://www.deribit.com/main#/options?tab=all

And going into the halving I look at the March and June expiry contracts. From what I can see, there has been lots of volume lately with the $8000 and $9000 calls. You can see this by looking at the open interest which is around 1300-1400 contracts. There is even more at the $12000 and $16000 calls with over 1700 and 1600 contracts respectively.

So you can see that many people are betting that the halving will have a positive effect. Basically at the very least around the March expiry we should see $9000 and at best maybe $12500 or $16300 or so.

Keep in mind this isn't always accurate, 2 months ago there was tons of open interest for the $10K and $11K calls which were to expire on Dec 27 2019, which meant price would touch $11K-$12K one more time before the new year and that never happened.

That is true, it only indicates where the people's interest lies and what they feel about the BTC pricing in the coming future. At this moment, most of the people are probably bullish and its not a bad idea to straddle so that you cover all your bases. About Options trading platforms, deribit is good but I prefer Sparrow Exchange. It a lot friendlier UI and for a a guy like me who's pretty recently started with trading Options, it seems the best place. Do your own research though.

[pooya87]

i don't think that is something we can ever measure with a "study"!
it is a speculation that could only be made AFTER the halving and the price rises were done. and that means at least 6 months after the halving we can sit back and analyze whether right now in January 2020 the halving is priced in or not.
anything that is said now is a pure guess in my opinion not a study. my guess is that we still have 3 more steps to even get close to the halving being priced in. the first is the wise money entering bitcoin in expectation of the rise. the second step is the FOMO that has always happened about a month before the halving when majority fear missing out on the rise and jump in. and the final step is the time after halving where the effects of the "50% reduction in supply creation" is being felt in the market for real.

[franky1]

i don't think that is something we can ever measure with a "study"!
it is a speculation that could only be made AFTER the halving and the price rises were done. and that means at least 6 months

wrong. right now we can study that if the halving happened right now the halving is not priced in.

ofcourse hashrate can decline and mining cost can decine whereby if the price was $7.8k in 6 months and the mining cost was $3.9k then that would mean when a halving happened at that time the miners are still breaking even and thus at that point the halving is 'priced in

ofcourse hashrate can remain stagnant and mining cost can stagnate whereby if the price was $7.8k in 6 months and the mining cost was same as now then that would mean when a halving happened at that time the miners are not breaking even and thus at that point the halving is not 'priced in'

ofcourse hashrate can remain stagnant and mining cost can stagnate whereby if the price was $13k in 6 months and the mining cost was same as now then that would mean when a halving happened at that time the miners are breaking even and thus at that point the halving is 'priced in'

but thats the future situation...

you specifically said its impossible to know if january 2020 has it priced in.. and only able to tell months after the halving looking back many months..
no. todays costs and todays price does not have the excess speculative profit that could manageably cope with a halving right now.

the price has to go up or mining costs have to go down.
its something that can be studied before the event.. not months after.

ofcourse we cannot predict the speculative price of 6 months time
ofcourse we cannot predict the hashrate amount of 6 months time
ofcourse we cannot predict the mining hardware of 6 months time
so we cannot predict if in 6 months time (just before halving) if its priced in

but january2020 situation can tell you that JANUARY 2020 numbers do not have excess buffer in the speculative price to cover a halving happening right now

[Wind_FURY]

for bitcoin halving to be priced in the market price would need to be at double of mining cost.

obviously

this is because if hashrate continues at same level then with half as many coins awarded the value of the coins would need to double to cover the mining cost.

right now the cost of mining vs bitcoin price is not at a double

the most efficent mining cost is about $6500 and the market price is not that far above.
if the market price was say ~$13k+ then yes the halving would have been 'priced in' but that is not the case.

as the halving gets closer, a few possible things can happen
mining hardware cost/efficiency gets better(lower cost) to compensate
hashrate declines and those remaining get more slice of the reward pie to compensate
market price increases to compensate

Debating for the sake of learning.

Why base it on that? What about the market? Because if all information about the halving, "the when/the how/the what" is all public, then hasn't the market already reacted, and therefore already priced it in?

[alyssa85]

for bitcoin halving to be priced in the market price would need to be at double of mining cost.

obviously

this is because if hashrate continues at same level then with half as many coins awarded the value of the coins would need to double to cover the mining cost.

The key word there is "if".

Suppose there is no surge in price in the lead up to the halving. The miners then need to look hard at their businesses and try to cut costs to stay in the game. The biggest cost is electricity, I expect some of them are already trying to scope out places with cheaper electricity. Others may be just hoping that the price rises and rescues them.

More likely some miners will go bust after halving. Litecoin hashrate dropped by 32% after their halving last August:

https://blockgeeks.com/litecoin-hashrate-falls-by-32-86-after-block-halving/

It's not beyond the realms of possibility that the same thing happens for bitcoin.

[Darooghe]

Whether it has already been priced-in by miners or not, the miners’ behavior shows there’s additional specialisation with better hardware being developed and released. Not only would that make the hash rate go up, it would also diminish profitability for the entire mining space. Therefore, I see miners pushing for lower prices until the halving takes place. The harder it is to mine until the halving, the more miners will drop off, leaving more room for profits for the players who stay.

[Wind_FURY]

Plus what's everyone doing/proving by saying that "halving isn't priced in"? Are they trying for it to be priced in? Better to tell everyone that it's priced in.