Afraid to buy the dip? Bitcoin options provide a safer way to ‘go long’ from $38K
The last time Bitcoin (BTC) traded above $50,000 was Dec. 27, 2021. Since then, four months have passed, but traders seem somewhat optimistic that inflation has hit the necessary threshold to trigger cryptocurrency adoption.
In theory, the 8.5% inflation in the United States means that every five years, the prices increase by 50%. This essentially turns $100 into $66 by slashing 33% of the dollar’s purchasing power.
The U.S. Federal Reserve FOMC meeting is expected to rule on the interest rates on May 4, but, more importantly, the FED is expected to announce a program to offload part of its $9 trillion balance sheet. Thus, instead of supporting debt and mortgage markets, the U.S. Central Bank will likely sell $95 billion worth of these assets every month.
The consequences could be severe and risk markets have priced in such a scenario. For instance, the Rusell 2000 mid-capitalization stock market index is down 16.5% year-to-date in 2022. Similarly, as measured by the MSCI China index, the Chinese stock market is currently facing a 20% correction year-to-date.
There is no way to know what will trigger a Bitcoin bull run, but a report by Glassnode on April 18 has detected "a large amount of coin supply" accumulating between $38,000 and $45,000. For traders who believe BTC will reach $50,000 by July, there is a low-risk options strategy that can be used to cast a long bullish bet.
Following the whales and large investors usually pays off, but most traders are looking for ways to maximize gains while also limiting losses. For example, the skewed 'iron condor' maximizes profits near $50,000 by July by limiting losses below $38,000.
The call option gives the buyer the right to acquire an asset at a fixed price in the future and
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