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.

Error in Time-Locked Bitcoin Contracts Allows for Miner 'Fee-Sniping'

Michael LaVere
  • Crypto researcher 0xb10c discovered an error in bitcoin "time-locked" transactions that could be used as an attack vector.
  • Miners can take advantage of the program to carry out "fee-sniping" and steal funds from one another. 

Users have discovered an error in bitcoin “timelocked” contracts that could potentially allow miners to steal BTC from one another. 

Anonymous crypto engineer 0xb10c reported discovering more than one million “time-locked” transactions made between September 2019 and March 2020. In a post, 0xb10c detailed how these special bitcoin transactions were not being accurately enforced by the network. 

As opposed to normal transactions, time-locked transactions prevent recipient bitcoin from being accessed after sending. Users must wait for a specific number of blocks to be added to the network in ten-minute intervals before gaining control of their bitcoin. 

0xb10c claimed the errant time-locked transactions provided an attack vector for miners to steal transaction fees  from one another via “fee-sniping.” According to the engineer, the backlog of time-locked transactions were being purposefully designed for a “potentially disruptive mining strategy” involving the theft of miner fees. 

In an interview with CoinDesk, 0xb10c said time-locked transactions represented a “low-priority” problem at present that could eventually balloon to involve the wider network. He explained that fee-sniping would become more lucrative in a few years as the majority of miner income shifts towards transaction fees. 

He continued, 

A fix for this has been released in early 2020. However, it will take a while before all instances of the currently deployed software are upgraded.

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