BlockTower Capital Executive's BTC Options Purchased for $1 Million Will Likely Be Worthless

Ari Paul, the chief information officer and managing partner at BlockTower Capital, a cryptoasset investment firm, had purchased a call option for nearly $1 million that had predicted a bitcoin (BTC) price of $50,000 by December 28th, 2018.

However, as the contract’s expiry date approaches, the BTC price continues to fall sharply as it’s currently trading at around $3,400 according to CryptoCompare data. Notably, bitcoin’s value is down nearly another 10% in the past 24 hours, the lowest it has been since August 2017.

Not "As Bad As It Seems"?

Paul, a former portfolio manager at the University of Chicago, had purchased the million dollar call option “just days” after the bitcoin price reached an all-time high of nearly $20,000 on December 17th, 2017. According to Bloomberg, the outcome of the trade, which will likely result in huge losses for the buyer (as BTC price would have to rally over 1,400% for the contract to be profitable), is not “as bad as it seems.”

Paul claims he had purchased the options from LedgerX’s exchange while also selling some of his crypto fund’s BTC holdings. During an interview with CNBC (on December 27th, 2017), the hedge fund manager had explained that the trade let him “lock-in” some profit - while reducing exposure to the market’s volatility and potentially receiving a huge payout if BTC price exceeded $50,000 by end of 2018.

On the date when Paul acquired the options, bitcoin was trading at around $16,200, however, the price of the flagship cryptocurrency and all other digital assets has dropped considerably from their all-time highs in December of 2017. In his interview from last year, Paul told CNBC: 

These calls let me capture upside while reducing my downside risk.

LedgerX, Paul Have Not Shared Details Of Their Trading Activities 

The investment advisor also told his followers on Twitter that his trade, which involved selling a portion of his BTC holdings and simultaneously purchasing the call options, was a profitable move. However, Paul has not publicly shared the performance of other cryptoassets that are under his management.

LedgerX, the first US-based regulated bitcoin options exchange, has also not identified who the buyer or the seller of its options contracts are, but the company did confirm that the said position was entered. LedgerX’s management team further noted that the position has a notional value of $13.75 million, and that it is the largest BTC options trade conducted on its platform.

Overstock CEO Sells Shares in His Company to Invest in Blockchain Projects

Patrick Byrne, the chief executive officer of Overstock.com (OSTK), has recently lashed out at investors who questioned his sale of 900,000 of his ‘founders shares’ in the company. Justifying his move, he revealed he needed the funds to invest in blockchain projects.

According to Business Insider, Byrne recently sent a letter to shareholders after the company’s stock prices plunged over 21% this week to their lowest since 2012, after he revealed he sold 500,000 of his shares earlier this week.

On Friday, the CEO revealed he sold an additional 400,000 shares, meaning he sold over 15% of his stake in the company. Although Overstock’s shares recovered on Friday, May 17, Byrne’s letter to shareholders was notable. In it, he wrote:

I simply had to supplement my nominal salary with stock sales in order to fulfill personal commitments to invest personally in blockchain projects such as Medici Land Governance, along with a need to meet charitable pledges.

The CEO added that he doesn’t plan on giving such an explanation again, justifying that he owes shareholders “staying within the law and not making decisions based on inside information, not explanations of my life and projects outside Overstock.”

He noted that the “unanticipated stir” caused by his sale was unexpected, and added “I had no idea that shareholders would demand explanations of why and how I might want to use my cash derived from my labor and my property to pursue my ends in life.”

Byrne is notably Overstock’s largest shareholder, and noted he told investors a year ago he would be making “significant sales” to fund different projects, including those related to blockchain technologies and, presumably, cryptocurrencies.

In fact, the libertarian sold 775,000 of his shares in September of last year, before this week’s sale. The stock’s price has fallen roughly 90% from its record high in January of 2018, when Overstock was benefitting from its cryptocurrency ventures and accompanying the cryptocurrency market’s performance.

In November of last year, Byrne revealed he had plans to sell Overstock’s retail business and go “all-in” on cryptocurrencies and blockchain technology. The CEO’s plan would see the company focus on its fully-owned subsidiary Medici Ventures, which has been invested in blockchain-related startups, after selling its retail business.

Overstock's price performance over the last two yearsSource: Yahoo Finance

Byrne has notably been battling short sellers targeting Overstock, as the firm competes with the likes of eBay and Amazon. Financial analytics firm S3 Partners has estimated short bets against it stand at $157 million, or 50% of its float. This makes it more targeted by short sellers than 99% of companies in the U.S.

Despite the company’s performance on exchanges, Overstock has since launched its tZERO security trading platform, and was one of the first companies to pay a “portion” of its taxes using bitcoin in Ohio.