I've spent years as a techie or geek, leading me to work in crypto at its peak as a marketer and project manager. I've also been trading options and futures for nearly a decade. That gives me a unique perspective on the many faces of the machine. I want to share how I think about pricing, specifically Bitcoin, and emerging assets in general, because there is a lot of misinformation out there, and a lot of people on YouTube and elsewhere happy to profit from it, and from you.

Rule One: A Promise Is a Red Flag

I famously like to say "I don't like to make a promise." If anyone tells you, with total confidence, that Bitcoin is going up or going down, be very wary. They are almost certainly trying to sell you something.

Nobody knows where the price of these assets is headed. If someone truly knew, they would act on it, that information would get absorbed by the market, and the price would move there immediately. This happens every day. In short, markets are a price-discovery tool. Big swings and rallies are usually the market correcting a price that was briefly wrong.

Here's a concrete example from when I traded stocks with dividends. When a stock pays a dividend, we know for a fact, by rule, that the dividend amount comes out of the stock price. So when buying options on that stock, you can adjust for the dividend with mathematical certainty. Known information gets priced in.

Now apply that logic to the people predicting Bitcoin's future price, or SpaceX's. If what they said were true, for the reasons they claim, the price would already have jumped there the moment they posted it on their guru blog. What does that tell you? Their information is speculative at best, and so is its effect on the price. Most online "experts" take speculation and repeat it back to you with confidence. Otherwise known as a grift.

The Best Information Is Free, and It's the Market

The best information on Bitcoin, or any asset for that matter, is sitting right in the market itself. You don't need a course, just an understanding.

The price of a freely traded asset reflects where the deepest pockets have pushed it. If there are more buyers than sellers at a given moment, the price rises because of the imbalance between the bid (the buying price) and the ask (the selling price). Unless you have access to detailed order book data, there isn't much more to extract from the price of the underlying asset alone.

Where there is a huge depth of information, and where few people know to look, is the options market. Options exist on almost everything: the S&P 500, individual stocks like Apple, commodities like crude oil, orange juice, and corn, and crypto assets like Bitcoin and Ethereum. The options market tells you a great deal about what traders expect to happen to these assets over a given period of time.

What the Volatility Smile Tells You :)

One of the most useful things to look at is the implied volatlity charts, for the volatility smile: the pattern of implied volatility across different strike prices. Its shape reveals where the market's fear is concentrated.

Equities: Fear to the Downside

The S&P 500 has what's often called a volatility smirk. Picture 😏 but mirrored: out-of-the-money puts are priced much higher than out-of-the-money calls. Imagine an X/Y graph with strike price on the X axis, puts or downside insurance sit on the left of the graph, and implied volatility (the market's expected size of moves, 5%, or maybe 25%) on the Y axis.

On most days, that shape makes sense. The default state of the economy, and of people's jobs, is to create growth. Companies leverage technology to get more efficient, earnings slowly rise, and productive countries grind GDP upward. What interrupts that grind are sudden shocks to the downside: bad news that lowers expectations for future earnings.

Tariffs are a good example. I won't get into whether they help or hurt the economy in the long run, but they create a shock to expected corporate earnings up and down the supply chain, and uncertainty about further escalation pushes volatility higher. Volatility is uncertainty about future prices. It stays elevated until the new information is understood or resolved, then markets calm down and start grinding up again with more certainty.

At-the-money implied volatility for the index typically sits in a relatively low range, and that number roughly represents how much the market expects prices to move over a year. That lines up with reality: lately the broader US market moves something like 10% in a typical year, though the range is wide. It can crash 50%, or it can end the year flat.

Commodities: Fear to the Upside

Commodities flip the picture. Their smirk points the other way, with out-of-the-money calls, or insurance for upside moves, being the most expensive.

Take crude oil. Consumers want oil to be cheap, but if war breaks out in the Middle East and shipping routes are disrupted *cough* getting oil out of the region becomes harder and prices shoot up. For oil, surprises and bad news push the price up, not down. The market understands that, which is why the volatility smile is a mirror image of the S&P 500's.

Bitcoin: Steeper in Both Directions

Bitcoin's volatility smile explains its risk well. It has a steeper curve, almost but not quite U-shaped, like a combination of equities and commodities.

That's real information. It means the most informed people in the market are worried about two things at once: that Bitcoin could crash and keep free-falling, or that it could melt up and go to the moon. Options prices have settled on a smile that says the market can move violently in either direction.

I'd argue the shape of this curve is a result of price discovery still in progress. By and large, markets have no idea whether Bitcoin is headed to $1,000 or $100,000, and the volatility chart confirms it. The only certainty is that the trip south to $1,000 would be faster than the trip up to $100,000.

On top of that, Bitcoin's at-the-money implied volatility is very high compared to traditional assets like the S&P 500. The market is fundamentally not confident about where the price is going. All of that is visible to anyone who knows how to google and read options data.

Why the Market Beats the Pundits

Anyone in the world can trade in these free markets. Whether you're looking at the volatility smile, the level of implied volatility, or the price of Bitcoin itself, the price always settles where supply and demand meet.

And the people with the deepest pockets, the ones who can move prices the most, tend to have the best information. The wealthiest investors employ the most expensive and most capable fund managers. These whales are usually the ones setting prices.

So you don't need anyone's newsletter. You don't need some self-proclaimed expert pointing to cherry-picked results that you can't verify, and that could just as easily be luck. You can skip all of it and see what the smartest, best-funded participants in the world think by looking at the options market. Right now, Bitcoin is a very risky asset still discovering its own price, with expensive options on both the upside and the downside.

Prediction markets are a good way to picture how options volatility works. There's a set expiration date (the day the event happens), and as that date approaches, the odds converge toward the final outcome. Uncertainty shrinks with time, just like a option as it nears expiration. Take the Super Bowl: who will make it, or better yet, win it? That question gets easier to answer as game day approaches. Why trust markets over gurus? Betting odds on elections have often been better predictors of the winner than traditional polls. People with money on the line tend to be more honest, and less biased, than strangers filling out a survey.

The broader lesson: watch what people do, not what they say. And notice when and where they say it. Are they speaking privately with a friend at the pub, or are they a talking head on some social? Politicians shade the truth. Social media gurus selling courses shade the truth. Everybody has an angle. But money doesn't lie. If you want to know what something is worth, follow the money, and the best way to do that is to learn to read the options market.

The Honest Answer: Nobody Knows

The market has no idea where Bitcoin is going. Personally, the only value-add I see for Bitcoin comes alongside dire social strife, and if that day comes, I'll have bigger concerns than cashing out my Bitcoin for a trip to the Maldives. There are legitimate bull and bear cases, and it remains to be seen how they play out.

The bull case: Bitcoin is digital gold. Central banks keep inflating their fiat currencies. Government spending keeps rising without a level of growth achieved, or return on spend, that can pay back the debt. Countries like El Salvador have experimented with it and utilize it, and institutions are buying in, treating it as a safe haven in case something goes wrong with traditional currencies. These are valid arguments. Black market economies and the best way to get your money out of a country. 

The bear case: Does it have to be Bitcoin? Yes, the supply is fixed, but the same is true of every Bitcoin copy. Being the first mover isn't a guarantee. AOL was an early giant of the internet, and I never send emails to @aol.com addresses anymore. Gold is an actual element on the periodic table, something I can feel, touch, and build computers with. Why must the world assign value to Bitcoin specifically, rather than some alternative? And what kind of world would we be living in if people need to adopt a decentralized form of money? How would governments do fiscal & monetary policy, promoting economic stability? My bank and apps already let me move money quickly and commerce just fine. And what happens if AI and quantum computing can break the cryptography that secures the chain?

Every time Bitcoin rallies, the gurus reappear: follow my newsletter, buy my course, retire early. They prey on people who don't understand what financial markets fundamentally are, a price-checking machine. And would they be selling you something if the price-checking machine proved them right?

Markets Are Uncertain

This is the part I really want people to get. Financial markets are inherently uncertain. That's why they're markets.

If there were real consensus about where a price was going, it would go there instantly, just like in the dividend example. Markets are extremely efficient. They aren't drifting around mindlessly. Billions of people around the world are trying to squeeze pennies out of every inefficiency. When a market keeps whipping around, it's telling you there is no certainty about the future price, given the information consensus.

So the next time someone tells you exactly where Bitcoin is headed, check the options market instead. It will tell you the truth: and as of right now, nobody knows. But for the sake of good conversation, I suggest you at least have a hunch.

-james