Bitcoin options are assigning a low probability to prices reaching record highs by the end of the year as volatility expectations continue to fall amid a dour mood in the market.

According to data source Skew, options traders are pricing an 8% chance of the cryptocurrency rising to a new peak above $64,800 by Dec. 31. The probability of bitcoin trading in six figures is just 2%.

Some observers may feel the market is underpricing the probability, but the numbers need to be read in context with the recent price action.

Bitcoin has more than halved since peaking above $64,000 in mid-April. Bullish sentiment has weakened so much that the annualized rolling three-month basis (spot minus futures) in bitcoin futures listed on Binance fell to zero earlier this week. Futures listed on Binance, the world's largest crypto exchange by trading volume, traded at a premium of nearly 40% during the height of the bull run.

The six-month implied volatility, or investors' expectations for price turbulence, has dropped to a more than two-month low of 80% at press time, having peaked at 122% on May 17, Skew data show.

That implies investors expect the price consolidation to continue for a while. The cryptocurrency has mostly traded in the $30,000 to $40,000 range for the past two months, barring occasional dips to $29,000.

Options market probabilities have a positive correlation with implied volatility: The greater the volatility, the higher the odds of bitcoin hitting certain levels.

A word of caution, however. As the name suggests, options probabilities are probabilities and can change quickly along with market conditions.

For example, for the first 10 months of 2020, the market consistently signaled a less than 10% chance of bitcoin jumping above $20,000 by Dec. 31. Nevertheless, the cryptocurrency broke above the key level in mid-December and ended the year near $29,000.

At press time, bitcoin was changing hands near $32,300.

Options probabilities are calculated using the Black-Scholes formula based on metrics such as call option prices, strike prices, the price of the underlying asset, the "risk-free" interest rate on investments as U.S. Treasuries and the time to maturation.

Options are derivative contracts that give the purchaser the right, but not the obligation, to trade the underlying asset at a predetermined price on or before a specific date. A call option represents a right to buy, a put option the right to sell.

Also read: Bitcoin Looks North After Biggest Single-Day Rise in More Than a Month