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.

Bitcoin’s 90-Day Active Supply Points to Bullish Phase Ahead: Report

Michael LaVere
  • New Stack Funds report found bitcoin underwent a surge in its 90-day active supply, pointing to a bullish phase ahead.
  • Bitcoin's 90d % has returned to pre-2017 bull run levels, indicating holders are switching to a long-term investment strategy.

Bitcoin’s 90-day active supply has reached its pre-2017 bull run level, pointing to a possible bullish phase in the cryptoasset’s future. 

According to a report published by digital asset manager Stack Funds, bitcoin ended Q2 2020 on a strong note, with holders continuing to consolidate and adopt a long-term investment strategy. The report claims bitcoin underwent a surge in its 90-day active supply over the last quarter, which serves as an indicator for the sentiment cycle of coin holders. 

The report reads:

Prior to the 2017 and 2019 bull run, where Bitcoin hit $20,000 and $14,000 highs against the dollar, there was evidence of steep surges in the 90d % active supply [...] These occurrences tend to peak for a window of 60 - 90 days, before Bitcoin’s induced price rally is realised.

Stack Funds continued, saying the spike in active supply has historically pointed to a run-up in bitcoin prices, which the authors believe “could happen sooner rather than later.”

The report also found a general tapering in bitcoin’s 90-day active supply over the past three years, suggesting that investor’s time horizon has lengthened, with investors holding BTC over longer periods. The authors claimed it has become apparent that investors are “accumulating the digital asset with expectations of a potential price increase.”

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