The potential approval of a Bitcoin ETF (Exchange Traded Fund) is bound to open new opportunities for traders. The expectations surrounding this event impact the market now, but an expert believes they will have a more substantial effect in the coming months.
As of this writing, Bitcoin trades at $37,400 with a 1% profit in the last 24 hours. Over the previous week, the cryptocurrency stayed in the green with a 3% profit, holding the critical level of $37,000 despite the increase in selling pressure.
BTC’s price trends to the upside on the daily chart. Source:
The Lucrative Strategy In Anticipation Of Bitcoin ETF Approval
As Bitcoin’s value soars with a remarkable 125% increase this year, a new trading strategy emerges, promising high returns in the wake of the anticipated Bitcoin ETF. A seasoned market analyst, Markus Thielen, unveils insights into leveraging the evolving crypto market dynamics for profitable trading in an essay posted by options platform Deribit.
Thielen’s reveals an “unusual” trend in the Bitcoin market: despite its significant rally, the 30-day realized volatility remains at a modest 41%, starkly contrasting to the 5-year average of 63%.
According to the analyst, this subdued volatility reflects a declining interest in leveraged Bitcoin options, a direct consequence of institutional players entering the crypto arena.
These players, holding significant Bitcoin assets, will likely sell volatility, fostering a more stable market environment that mirrors traditional financial markets.
In this landscape, the strategy of selling strangles (120% call and 80% put) on a 30-day rolling basis stands out. According to Thielen, this approach has shown profitability in approximately 23% of cases over the past year, as seen in the chart below, marking a significant improvement from the decentralized finance (DeFi) summer’s high-risk profile.
BTC’s price has rallied 20% four times this year as it approaches this area. Source: Markus Thielen via Deribit
At that time, DeFi protocols attracted billions in capital to the crypto ecosystem contributing to the incipient Bitcoin rally. While there are differences in the current market dynamics, options players are likely to benefit from this strategy.
This strategy, particularly effective during low-risk periods, suggests a window of opportunity for traders to capitalize on before introducing institutional influence.
Institutional Involvement Expected to Stabilize Bitcoin Market
The anticipated launch of the Bitcoin ETF is set to transform the market further. This event is expected to recalibrate the put/call ratio, which leans heavily toward calls.
Thielen compares it to the S&P 500, where the put/call ratio has been more balanced. The Bitcoin market might soon witness a similar equilibrium, presenting an opportunity for traders to harness volatility through a sell-put strategy.
Furthermore, Thielen notes that the post-ETF approval phase could be the last chance for traders to exploit high volatility levels. Once institutional players begin systematically selling volatility, the market is expected to enter a phase of reduced price fluctuations, making volatility-based strategies less effective.
The analysis also touches upon Bitcoin’s correlation with broader market indicators like the VIX index. While the Bitcoin market has maintained high volatility relative to the VIX index, this gap is anticipated to narrow, offering traders a strategic edge in timing their trades effectively.
In conclusion, as the Bitcoin ETF approaches and institutional participation increases, savvy traders can look towards selling strangles as a strategic approach to capitalize on the current market conditions.
Cover image from Unsplash, chart from Deribit and Tradingview
A literature major, Reynaldo Márquez has been deeply immersed in the crypto industry since 2017. His journey began with translating articles for various crypto news outlets, a role he took on with zeal. In 2018, amidst a challenging market, he embraced his first writing assignment, demonstrating his unwavering commitment to the nascent industry and the promise of change it bears for many people worldwide.
In March 2021, he joined the prestigious crypto news outlet NewsBTC and Bitcoinist, where he not only reported on the latest crypto news but also had the privilege of interviewing some of the industry's most influential figures. A year later, his dedication and hard work were recognized, and he was promoted to Managing Editor, a position he currently holds with pride.
He believes in honesty, good communication, hard work, and the power of cryptocurrency and its potential to transform people's lives, especially those alienated by the legacy financial system. Born in 1992 in Venezuela, Reynaldo is familiar with how governments and central banks can negatively affect people, their everyday lives, and their futures by creating inflation and erasing their hopes for a better future. Thus, like many Venezuelans, he embraced this new technology to help him and his family navigate difficult times.
In another life, Reynaldo would have pursued a career as an investigator, most likely tracking down the origins of the Cyberpunk movement with the publication of William Gibson’s ‘Neuromancer.’ The intersection between fiction and reality, with the materialization of Bitcoin in 2009, would have allowed him to dive deep into the crypto sphere as something more than a financial phenomenon but also a cultural shift in society that was brewing since the XX century, and maybe even sooner, in the XIX century with the publication of Henry David Thoreau’s ‘Civil Disobedience.’
But that’s for another life. In this one, Reynaldo has been trading to improve his trading skills. Since 2023, he has been trying to learn Python to create successful strategies and find ways to execute them. It is a difficult task, which continues to keep him busy today and will most likely continue to keep him busy in the near and long term.
In his free time, he enjoys lifting heavy objects, reading, watching movies, and listening to his favorite music. Some of his favorite authors are Walt Whitman, William Faulkner, Allen Ginsberg, James Baldwin, Raymond Carver, Ray Bradbury, George Orwell, Mario Vargas Llosa, Reinaldo Arenas, Rafael Cadenas, and many others. Lately, he has been primarily interested in reading about dystopic societies, a topic that deeply resonates with the crypto industry.
Since 2023, he has lived in Spain with his wife. He loves the weather, the food, and the people and their culture. They both expect to travel much more within the country they now call home and beyond its border. He hopes to retire with his wife, maybe in a quiet place near a beach, but most likely in a city close to a library and a university with his kids and, hopefully, grandkids.
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