The last time Bitcoin (BTC) traded above $50,000 was on Dec 27, 2021. Four months have passed since then, but traders seem somewhat optimistic that inflation has reached the threshold needed to trigger adoption. of the cryptocurrency.
In theory, inflation of 8.5% in the United States means that every five years prices increase by 50%. This essentially turns $100 into $66, cutting 33% off the purchasing power of the dollar.
The US Federal Reserve’s FOMC meeting is expected to rule on interest rates on May 4, but above all, the Fed is expected to announce a program to unload part of its $9 trillion balance sheet. Thus, instead of supporting the debt and mortgage markets, the US central bank will probably sell $95 billion of these assets each month.
The consequences could be severe and risk markets have priced in this scenario. For example, the Russell 2000 mid-cap stock index is down 16.5% so far this year. Similarly, according to the MSCI China Index, the Chinese stock market is currently facing a 20% correction year-to-date.
There is no way of knowing what will trigger a Bitcoin bull run, but a Glassnode report on April 18 has spotted “a large amount of coin supply” hovering between $38,000 and $45,000. For traders who believe that BTC will hit $50,000 in July, there is a low-risk options strategy that can be used to launch a long bullish bet.
Biased ‘iron condor’ has limited downside risk
Following the whales and big investors is often profitable, but most traders look for ways to maximize profits while limiting losses. For example, the biased ‘iron condor’ maximizes profits near $50,000 in July, capping losses below $38,000.
The call option gives the buyer the right to acquire an asset at a fixed price in the future and the buyer pays an initial fee known as a premium for this privilege.
On the other hand, the put option provides its buyer with the privilege of selling an asset at a fixed price in the future, a downside protection strategy. Meanwhile, selling this instrument offers upside price exposure.
The Iron Condor consists of selling both the call option and the put option at the same price and expiration date. The example above has been set using the July 29 BTC options.
The profit zone is between 40,500 and 60,500 dollars
To start the trade, the investor needs to short 1 $44,000 call option contract and another 1.4 $44,000 put option contracts. The buyer must then repeat the procedure for the $50,000 options, using the same expiration month.
To protect yourself from an eventual drop, you need to buy 3.46 contracts of the $38,000 put option. Lastly, you need to buy 1.3 contracts of the $70,000 call option to limit losses above the level.
This strategy produces a net profit if Bitcoin trades between $40,500, 4% above the current price of $38,900, and $60,500 on July 29. Net earnings peak at 0.33 BTC at $50,000, but remain above 0.21 BTC between $43,200 and $53,400.
Meanwhile, the maximum loss is 0.21 BTC at either end if the price of Bitcoin trades below $38,000 or above $70,000 on July 29, which seems quite unlikely.
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