Eying the future of Bitcoin as the People take on the Street

29 Jan, 2021
Eying the future of Bitcoin as the People take on the Street

In the blink of an eye, Bitcoin’s future appears to be swinging back into the hands of everyman. The man/woman on the street. The retail traders. Call them what you will, this week, they’ve captured the attention of the financial world as they exert their collective power and influence on the traditional and digital fiscal worlds.

Just days ago, the crypto universe was anxiously speculating on what would happen when more than 120,000 Bitcoin options expired today. Would the world’s first digital currency begin another rally to test its recent all-time high?  Would the bears take over instead?

But while traders had their eye on the BTC options, other forces were at work.  One, the band of renegade traders who brought Wall Street to its knees with its Game Stop “Get Shorty” trading game.  And two, Elon Musk.

Let’s start with the options.  We’re talking $4 Billion BTC options which expired today.  “A stock option gives an investor the right, but not the obligation, to buy or sell a stock at an agreed upon price and date,” according to Investopedia. While not getting into the nitty gritty here, those with BTC options have the power to push the price of the coin up or down. As the price of BTC hovered around the low 30K USD this week, traders were waiting to see if the option holders would move the coin’s price into bear territory or back to the bulls.

Earlier in the week, when the option expiration appeared to be the only major factor in the market, analysts’ views were mixed on what would happen to the BTC price.

In an interview with Coindesk, Samneet Chepal, quantitative analyst at Ledger Prime, offered this assessment: “If BTC rapidly jumps to all-time highs within the next few days, it’s expected market makers will aggressively hedge their out-of-the-money short call option exposures, which would likely increase overall market volatility and momentum in the underlying price.”

“Considering the volumes traded over the past 24 hours and the put options open interest, there's not much gain for bears in pressuring BTC below $29,000, at least from the options market standpoint,” Marcel Pechman wrote in a Cointelegraph analysis just one day ago.

Other analysts were more direct.

“This was the craziest expiration in Bitcoin options history and it’s only the beginning,” Laevitas, the data analytics platform tweeted today.

All this speculation about the BTC options was overshadowed in the middle of the week as the eyes of the financial world were mesmerized by a group of “retail” traders who took on Wall Street by driving up the price of a struggling video retailer:  GameStop.

“The simplest explanation for what happened is that a bunch of hyper-online mischief-makers in Reddit’s r/WallStreetBets forum — a clan of self-described degenerates with user names like “dumbledoreRothIRA” and “Coldcutcombo69” — decided it would be funny and righteous (and maybe even profitable, though that part was less important) to execute a “short squeeze” by pushing up the price of GameStop’s stock, entrapping the big-money hedge funds that had bet against it,” summarized Kevin Roose in a New York Times op-ed.

The suits of Wall Street reportedly lost millions in short sales on the stock, and trading platform Robinhood halted trading of GME, citing regulatory and cash issues.  This mayhem in the traditional financial markets spilled over into the crypto sphere as Dogecoin (DOGE), which started as a joke digital coin, saw massive runups in its price as yet another Redditt group pumped it up.

As the people exerted their collective power to move markets, one man demonstrated his solitary influence:

Earlier this morning, with just one tweet, and a single change to his twitter profile, Elon Musk appears to have sent BTC soaring.

The tweet, short and sweet, said “It was inevitable.” His bio? Changed to #BTC. The coin price has been surging ever since.

“Tweeted at 8:22 a.m. UTC, Musk’s 43 million followers apparently took notice,” Cointelegraph reported. “Some assumed the tweet was a reference to the Dogecoin (DOGE) price surge which was ignited by r/wallstreetbet traders as a follow-up to the recent GameStop (GME) stock short-squeeze. Others assumed the tweet was related to Bitcoin.”

Musk has also been credited with moving the GME stock price with another short tweet earlier this week:  “Gamestonk!!”

The full impact of this week’s intriguing activity is still playing out in the crypto sphere. Options? People? Musk?  All eyes are watching to see what happens next.

Joyce Pavia Hanson