If you’re not living in a cave, you’re aware that bitcoin has been going crazy the past few weeks, with current prices hovering between $10,000 and $20,000 per coin. This is for an easily replaceable cryptocurrency with no fundamental value - or, for that matter, even a valuable role in today’s economy. This is tulip bulbs. It’s going to crash, and it’s going to crash big. But when it’s going to crash, and how high it goes before then, are not possible to predict.
So what can you do? With individual stocks, if you (you as a regular guy, not as an institutional investor) see one as overvalued, you generally have three options. You can short it, you can write naked calls, or you can buy puts. These have different pros and cons, but in general, shorting and writing naked calls expose you to unlimited downside (downside for you, upside for the security) since you may be required to buy the underlying security at any arbitrary market price. Buying puts caps your loss at the amount you bought the puts for, though there is a decent chance that you will lose 100% of that if the market stays irrational longer than your puts’ expiration horizon. However, they’re highly leveraged, so you can easily make many multiples of your investment if you hit big.
If bitcoin were a stock, buying puts would be the right investment vehicle for how I’m seeing it: the market seems to be completely irrational, and I have no idea how irrational it’ll be, so I don’t want the uncapped downside. But I can easily see bitcoin trading for under $100 when the dust settles, so highly leveraged seems great. And I don’t know the time horizon obviously, so the highly leveraged nature of puts gives me a few shots.
But while I see some exchanges that let you short bitcoin, and now there are a couple of legitimate futures exchanges that are offering various forms of calls on bitcoin, I’m not seeing a way to buy puts. Am I missing something here? Anyone else looking to cash in as a bitcoin bear?