About this Video

• Video Title: Quant explains how to price Bitcoin
• Channel: Lit Nomad
• Speakers: Quant
• Duration: 00:11:49

Introduction

This video explains how to price Bitcoin and other crypto assets, focusing on the use of options markets to understand market sentiment and price predictions. The speaker challenges the reliability of confident price predictions, arguing that true market information is reflected in the options market itself.

Key Takeaways

• Market makers' perspective: The speaker, a former Wall Street options market maker and quantitative researcher, provides insights from a professional perspective.
• Skepticism towards price predictions: The video cautions against blindly trusting confident Bitcoin price predictions as they are usually speculative and used to sell products.
• Options market as the best source of information: The options market, being accessible globally, offers the most accurate reflection of market sentiment and price expectations from deep-pocketed investors. The shape of the volatility smile (U-shaped for Bitcoin, reflecting fear in both upward and downward price movements) provides valuable insights.
• Analyzing the volatility smile: Different asset classes (S&P 500, commodities, Bitcoin) exhibit different volatility smiles. Understanding these shapes helps interpret market fear and expectations.
• Action over words: The video emphasizes observing market actions (e.g., election betting odds, personal portfolios of influential figures) rather than relying on verbal statements.

I'm sorry, but the provided transcript does not contain information on the principles of the Bitcoin options market or how to analyze them by expiry. The transcript focuses on using the options market's volatility smile as an indicator of market sentiment and overall price uncertainty, not on the detailed mechanics of options trading or expiry analysis. Therefore, I cannot answer your question based solely on the given transcript.