Here is how professionals can safely trade Bitcoin when the transaction price is close to 40,000 USD

Investors tend to define the market as bullish or bearish, but sometimes prices can stay within a certain range for a long time.

This lateral movement is not necessarily stable because the cryptocurrency market has high volatility, which stems from a series of uncertainties and early adoption cycles.

For example, investors believe that Bitcoin (Bitcoin) The bull market may regret this decision after the first week of 2021.

Coinbase’s Bitcoin price (in U.S. dollars) in January 2021. Source: TradingView

Starting on January 8, Bitcoin prices are trading in a descending channel in the range of $10,000. The movement lasted for 26 days and finally broke out in early February.

Bitcoin price (in USD) on Coinbase in August 2020. Source: TradingView

In August 2020 and September 2020, Bitcoin has two different ranges. However, it is impossible to treat these movements as a bull market. On the other hand, as the bottom of $10,000 has been tested many times, the bears have little reason to celebrate, but the market recovered from it.

Is Bitcoin price in an ascending channel?

Although it seems premature to say it now, Bitcoin may enter the positive range of $40,000 before the end of June.

The current Bitcoin price (in U.S. dollars) on Coinbase. Source: TradingView

The current range indicates a range of $37,000 to $43,000 on June 25, but due to the extreme volatility of cryptocurrencies, the support and resistance levels of the channel are sometimes strictly tested.

There is reason to believe that the upcoming short squeeze can quickly restore support for Bitcoin at $50,000, considering MicroStrategy raised $500 million with Paul Tudor Jones intends to increase his BTC position.

On the other hand, there are also concerns about the remarks of US Treasury Secretary Janet Yellen (Janet Yellen) Digital assets are used for money laundering and illegal payments A threat to the price of Bitcoin. In addition, Gary Gensler, chairman of the US Securities and Exchange Commission, recently expressed concern about the lack of supervision of cryptocurrency exchanges.

Smart traders take less risk in range trading

For option traders, sometimes the best option is to bet on maintaining the current range, especially in the short term. This is where the bearish strategy is used to spread the Christmas tree.

Deribit position generator profit and loss simulator.Source: Dribit

This option strategy is not to bet on a bull or a bear market, but to use protective put options to benefit neutral traders. If Bitcoin remains between US$37,170 and US$44,000 on June 25th, investors will profit. Therefore, it provides protection against 8.5% fluctuations in any direction.

To this end, in addition to buying 1.33 BTC in the put options valued at US$46,000, 2 BTC in the put options valued at US$36,000 have to be purchased, and 3.33 BTC in the put options valued at US$40,000 have to be sold. Each contract expires on June 25.

Christmas tree and put option spread is a low-risk strategy

There are less than 11 days before the expiration date of June 25, and it is reasonable to assume that the market is likely to remain within this range. However, if there is an unexpected change, the maximum loss of this strategy is 0.062 BTC (US$2,515, US$40,570).

In terms of profit, this strategy can generate 0.1375 BTC (5,500 USD) at 40,000 USD.

Therefore, this seems to be a wise choice for investors who expect the current bullish momentum to continue to rise. It is worth noting that most derivatives exchanges offer options trading as low as 0.10 BTC.

The views and opinions expressed here only represent the views of the author and do not necessarily reflect the views of Every investment and trading action involves risk, and you should conduct your own research when making a decision.