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Market underpricing record high probability

Bitcoin’s price has rallied from $3,867 to $13,800 over the past 7½ months. However, while prices have risen by over 250%, the chances of bitcoin reaching record highs by the end of the year have seen what appears to be a marginal rise from 4% to 6%. The probability peaked at 8% in July.

As such, one may conclude the options market is underpricing the possibility of prices rising to $20,000 before Dec. 31.

However, that’s not necessarily the case because bitcoin now has just eight weeks to chart a 50% rally to $20,000. Back in March, bitcoin had three quarters – nine months – to challenge record highs. As the time to expiration decreases, the probability of prices rising beyond a particular level declines.