Last year on December 22 a firm purchased a $1 million dollar options trade on the Ledger X platform that wagered the BTC/USD market price will be $50,000 by the last month of 2018. This week Juthica Chou, the president of Ledger X chatted with Jared Blikre at the Yahoo Finance All Markets Summit’s cryptocurrency presentations and explained to the audience how the bitcoin trade was settled for a premium.
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The Mysterious Bet Placed Last December That Wagered Bitcoin Will Touch $50K By the End of 2018
Last year after the price of BTC hit the $19K region on December 16, the cryptocurrency’s value started tumbling downwards and touched the $15K zone just before the holidays. On December 22 a company surprised a lot of people when they purchased a Ledger X futures contract betting the price of bitcoin would be $50,000 by the last month of 2018. An individual “familiar with the matter” told the publication Business Insider that the $1 million bet on bitcoin was placed by a firm called Blocktower Capital. Blocktower is a well-known hedge fund that has 175 startups under its belt, and was founded by Ari Paul a former executive at Susquehanna. After the Ledger X sale was executed Paul tweeted to his Twitter followers, “I wonder who bought these?”
Earning Yield Off of Bitcoin Market Volatility
At the Yahoo Finance All Markets Summit this week the president of Ledger X, Juthica Chou, explained how the call overwrite was executed and some of the reasoning behind the trade.
“This is an example of a call overwrite that was done back in December,” Chou explains showing the audience a chart of the million dollar trade settled on December 22. “So a lot of our market participants are bitcoin holders or have bitcoin on their balance sheet — But they are not really earning any yield off of it, so a common type of trade, even in the stock space to earn yield is something like a call overwrite.”
In this case back then bitcoin was $15,000 USD, the seller deposited 275 BTC with Ledger X. Then they sold 275 of the $50,000 strike call options expiring on December 2018.
A Million Dollars in Premium Made That Day
Chou explains behind the scenes the trade is very profitable as the contract buyers sold the options for a premium the day the trade took place.
“So one way to think about it is on trade date they sold these options for $3,600 per option,” Chou reveals to the All Markets Summit’s Jared Blikre. “Given the volatility of bitcoin, it’s a pretty healthy premium which is about 25 percent of the spot price at the time.”
They collected a million dollars in premium that day, and as soon as the trade is done, the premium is in their account and they can withdraw it. Then the trade gets held for a year or until someone trades out of it — So that expiration if bitcoin is above $50,000 then the seller will essentially sell the bitcoin for $50,000 and received another $14 million dollars.
Virtual Trading Pits Designed With Digital Currency In Its DNA
The president of Ledger X seems optimistic about the future of digital currencies and explains her firm is adding some of the old aspects of stock trading to the modernized cryptocurrency scene. One of the ideas is a ‘virtual trading pit’ modeled after the ‘pits’ stock traders used in the past to gather and trade shares and options. Most stock exchange pits have since been replaced by electronic trading services, and some of the largest trading floors have closed down.
“Were actually bringing back the social pit nature of trading and we launched a beta version of what we call ‘The Pit’ and it really harkens back to the pit days,” Chou adds.
A lot of the great elements of the social trading pit, people exchanging market color, knowing who their counterparties are, but we’re doing it in more of a modern way that’s specifically designed with digital currency in its DNA.
What do you think about the million dollar options bet placed on the Ledger X exchange? Do you think the idea of virtual pits would be a good concept for digital currency traders? Let us know what you think in the comments below.
Images via Pixabay, Ledger X, and Yahoo Finance.
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