The Bitcoin futures market is one of the best signals available to understand the trend in the price of cryptomone. Well, it usually reflects the attitude of investors towards the future of BTC. And therefore, the direction their investments will take in the short and medium term. Therefore, it is important to know that the futures market announces a Bitcoin at $50,000.
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The futures market and the price of Bitcoin
The relationship between the direction that the price of Bitcoin will take and the market for future contracts is based on the characteristics of Bitcoin itself. Thus, future contracts are essentially the promise to buy or sell a certain quantity of Bitcoins, at a certain price at a point in the future.
Therefore, the price at which these financial products are traded is a reflection of the value that investors believe the crypto currency will achieve.
And since the price of Bitcoin is nothing more than the product of the relationship between BTC’s supply in the market, and the demand for them. Knowing what investors‘ expectations are regarding its price, allows us to make more or less accurate predictions of how the cryptomoney will behave in the coming months.
Thus, when investors start buying future contracts on Bitcoin, at prices much higher than the BTC spot market price. We can be sure that optimism reigns in the crypto market, making a bullish rally more than likely in the near future.
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BTC at $50,000
This is exactly the situation that the futures market seems to be in at the moment. For, in the last three weeks, the equivalent of $150,000 in Bitcoin call options has been purchased through LedgerX for $50,000.
These call options allow the user who buys them, the ability to buy BTC at the price agreed in the contract, in exchange for an advance payment. In other words, I can buy a $50,000 Bitcoin call option for $1,000.
And when it expires, I will have the option to buy a Bitcoin for $50,000, regardless of its value on the spot market. As well as doing nothing and letting the call option expire.
Therefore, if I buy a call option for $50,000, and the BTC price reaches $52,000 or higher, I would make a profit on the trade. However, spending such a large amount of money on a future contract 440% above the current Bitcoin price is certainly a risky bet. This indicates that there is a high level of optimism regarding the price of BTC within the crypto world.
However, this doesn’t mean that the bullish rally in the price of Bitcoin is safe. Well, a similar situation was experienced as early as 2018 with Blacktower Capital investing $1 million in $50,000 Bitcoin options, without the expected rally. This is not to say that this is a minor fact when trying to predict the future of BTC. Making it our Tip of the Day here at Crypt Trend.