Here’s how the pros trade Bitcoin safely while its range is trading near $ 40K

Investors tend to define the market as bullish or bearish, but sometimes the price can stay within a specific range for an extended period.

This type of lateral movement is not necessarily stable because the cryptocurrency markets have high volatility that stems from a variety of uncertainties and the early adoption cycle.

For example, investors who concluded that the Bitcoin (BTC) bull run ended after the first week of 2021 likely regret that decision.

Bitcoin price on Coinbase in USD, January 2021. Source: TradingView

As of January 8, the price of Bitcoin traded in a descending channel within a range of $ 10,000. The movement lasted 26 days until it finally broke out in early February.

Bitcoin Price on Coinbase in USD, August 2020. Source: TradingView

In August and September 2020, Bitcoin had two distinct range periods. However, it is not possible to consider such movements as a bull market. On the other hand, the bears had little reason to celebrate, as the $ 10,000 bottom was tested multiple times, but the market rallied.

Is the price of Bitcoin in an ascending channel?

Although it seems premature to call it, there is a chance that Bitcoin has entered a positive range with the $ 40,000 target by the end of June.

Bitcoin price on Coinbase in USD, current. Source: TradingView

The current range indicates a range of $ 37,000 to $ 43,000 for June 25, but with extreme crypto volatility, the channel’s support and resistance levels are sometimes drastically tested.

There is reason to believe that an impending short contraction could quickly regain a $ 50,000 support for Bitcoin, considering the $ 500 million raised by MicroStrategy and Paul Tudor Jones’ intention to increase his position in BTC.

On the other hand, there is also the fear that the comments of the US Treasury Secretary, Janet Yellen, about the use of digital assets for money laundering and illicit payments, constitute a threat to the price of Bitcoin. . Additionally, Gary Gensler, Chairman of the US Securities and Exchange Commission, recently raised concerns about the lack of regulation on crypto exchanges.

Smart traders take less risk in range trading moves

For option traders, the best option is sometimes to bet on holding the current range, especially for short-term periods. That’s where the Christmas tree with the putting strategy comes into play.

Profit and loss simulator of the Deribit position builder. Source: Deribit

Rather than betting on a bull or bear market, this option strategy uses protective put options to benefit traders with a neutral stance. The investor will benefit if Bitcoin remains between $ 37,170 and $ 44,000 on June 25. Therefore, it offers protection against 8.5% movement in any direction.

To achieve this, one needs to buy 2 BTC worth of the $ 36,000 put option, sell 3.33 BTC worth of the $ 40,000 put option in addition to buying 1.33 BTC of the $ 46,000 put option. Each contract expires on June 25.

Spreading the Christmas tree with put options is a low-risk strategy

With less than 11 days before expiration on June 25, it is reasonable to assume that there is a good chance that the market will stay within this range. However, this strategy offers a maximum loss of 0.062 BTC ($ 2,515 to $ 40,570) in the event of a surprise move.

As for profit, the strategy can generate a profit of 0.1375 BTC ($ 5,500) to $ 40,000.

Therefore, it seems like a smart choice for an investor who expects the current rally in bullish momentum to continue. It is worth noting that most derivatives exchanges offer trading options as low as 0.10 BTC.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Every investment and trade move involves risk, you should do your own research when making a decision.