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Grayscale ETH futures ETF a ‘trojan horse’ for spot Ethereum ETF: Analyst

Bloomberg ETF analyst James Seyffart thinks Grayscale’s Ether futures ETF application is just a ploy to corner the SEC to approve its spot Ether ETF.

Grayscale Investments is using its Ether (ETH) futures exchange-traded fund (ETF) application as a “trojan horse” to corner the United States Securities and Exchange Commission into approving its spot Ether ETF, says Bloomberg ETF analyst James Seyffart.

Seyffart said in a Nov. 15 X (Twitter) post following the SEC delaying Grayscale’s ETH futures ETF bid that he believes if the SEC approves Grayscale’s application, then it would enable Grayscale to argue for the approval of its spot Ether ETF application.

If the SEC denies Grayscale’s bid, the asset manager could argue the SEC is treating Bitcoin (BTC) and Ether futures ETFs differently by allowing one under the Securities Act of 1933 but not the other.

“Watch [the SEC] try to either approve and argue why this is different from spot. Or Deny and argue why 1933 act products are meaningfully different from 1940 act products. Both are bad for SEC [in my opinion]. Genius move.”

Grayscale’s Ether futures ETF bid was submitted via a form 19b-4 — which exchanges file to inform the SEC of a security-based swap request. Seyffart said none of the 40 or so approved Ether ETF products went through the 19b-4 approval process.

Seyffart was initially unsure why Grayscale filed its Ether futures ETF via a 19b-4. He now believes Grayscale is playing “chess” with the SEC by using the Ether Futures ETF as a “trojan horse” to obtain a 19b-4 order from the regulator to corner them into a lose-lose situation.

Seyffart and Scott Johnsson, General President at Van Buren Capital General, agreed Grayscale wouldn’t launch the Ether futures ETF.

“Doubtful this product ever trades, but useful as a vessel to get spot ETH over the finish line,” Johnsson said.

Related: Bitcoin ETFs will drive institutional adoption in 2024 — Galaxy Digital’s Mike Novogratz

Seyffart’s comments come as the SEC delayed its decision on Grayscale’s Ether futures ETF on Nov. 15 — two days earlier than its Nov. 17 deadline. Seyffart said he wasn’t surprised by the delay.

Hashdex’s application to convert its Bitcoin futures exchange-traded fund (ETF) into a spot product was also put on hold by the securities regulator on Nov. 15.

BlackRock shared a similar sentiment to Seyffart last week, arguing that the SEC doesn't have a legitimate reason to treat cryptocurrency spot and futures ETF applications differently.

Magazine: Bitcoin ETF optimist and Worldcoin skeptic Gracy Chen: Hall of Flame

Sam Bankman-Fried might get early release, suggest legal experts

This Bitcoin options strategy allows early bird traders to prepare for BTC’s next breakout

Crypto traders expecting a price reversal could use this options strategy to get positioned in Bitcoin.

Bitcoin’s price broke below its 55-day resistance at $27,000 on May 12, down 12.3% in 30 days. But more importantly, it decoupled from the S&P 500 Index, which is basically flat from 30 days ago and 15% below its all-time high.

Bitcoin price in USD (right) vs. S&P 500 futures (left), 12-hour. Source: TradingView

As the chart indicates, for some reason, Bitcoin (BTC) investors believe that the favorable macroeconomic trends for risk markets were overshadowed by the increasing risk perception of the cryptocurrency sector.

Financial crisis could fuel Bitcoin’s price increase

For starters, there’s the impending United States government debt ceiling crisis, which, according to U.S. Treasury Secretary Janet Yellen, could cause an “economic and financial catastrophe." The increased risk of default should, in theory, be beneficial for scarce assets, as investors seek shelter from a weaker U.S. dollar.

The $5.6 trillion commercial real estate market in the U.S. is subject to additional risks due to high interest rates and troubled regional banks. Guggenheim Partners chief investment officer Anne Walsh stated, “We’re likely going into a real estate recession, but not across the entire real estate market."

There is also positive news on the cryptocurrency regulatory front, as the industry gathers additional support against the regulatory efforts of the U.S. Securities and Exchange Commission (SEC). The U.S. Chamber of Commerce filed an amicus brief on May 9, defending the Coinbase exchange and accusing the SEC of deliberately creating a precarious and uncertain landscape.

Further fueling investors’ hope is the Bitcoin halving expected for April–May 2024, when the miners’ incentive per block will be reduced from 6.25 BTC to 3.125 BTC. Addresses holding 1 BTC or more reached one million on May 13, according to the Glassnode analytics firm. In total, a whopping 190,000 “whole-coiners” have been added since February 2022.

Despite the recent Bitcoin price weakness, there are enough drivers and potential triggers to sustain a considerable bull run in the upcoming months. Professional traders are aware of the liquidation risks associated with futures contracts, so their preferred investment strategies include options instruments.

How to apply the risk reversal strategy in Bitcoin

Options trading presents opportunities for investors to profit from increased volatility or obtain protection from sharp price drops, and these complex investment strategies, involving more than one instrument, are known as “option structures."

Traders can use the “risk reversal” option strategy to hedge losses from unexpected price swings. The investor benefits from being long on the call option but pays for those by selling the put. Basically, this setup eliminates the risk of the stock trading sideways and comes with limited risk if the asset trades down.

Profit and loss estimate. Source: Deribit Position Builder

The above trade focuses exclusively on June 30 options, but investors will find similar patterns using different maturities. Bitcoin was trading at $27,438 when the pricing took place.

First, the trader needs to buy protection from a downside move by buying 2.3 BTC puts (sell) $22,000 options contracts. Then, the trader will sell 2.0 BTC put (sell) $25,000 options contracts to net the returns above this level. Finally, the trader should buy 3.2 call (buy) $34,000 options contracts for positive price exposure.

Investors are protected down to $25,000

That options structure results in neither a gain nor a loss between $25,000 (down 9%) and $34,000 (up 24%). Thus, the investor is betting that Bitcoin’s price on June 30 at 8:00 am UTC will be above that range while gaining access to unlimited profits and a maximum 0.275 BTC negative return.

If the Bitcoin price rallies toward $37,250 (up 36%), this investment results in a 0.275 BTC gain. Moreover, after a 42% rally to $39,000 within 45 days, net returns are 0.41 BTC. In essence, unlimited gains with a capped loss.

Even though there is no initial cost associated with this options structure, the exchange will require a 0.275 BTC margin deposit to cover the negative exposure.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Sam Bankman-Fried might get early release, suggest legal experts

Got liquidated with Bitcoin futures? Get 3.5x leverage using this options strategy

Here is how professional traders use Iron Condor options strategies to benefit from the banking crisis and the U.S. debt ceiling increase.

Bitcoin (BTC) bulls might be disappointed after the $31,000 resistance proved stronger than expected on April 14. However, looking at a broader time frame, Bitcoin has been the best-performing asset in 2023, gaining over 74% year-to-date at $29,000.

Positioning for weaker dollar, debt ceiling

It is worth noting that gold is merely 4% behind its all-time high, likely indicating a weaker U.S. dollar as investors increase the odds of recession and further fiscal turmoil for the world’s biggest economy.

Behind the bullish price momentum for Bitcoin are the weakness in the U.S. financial system, namely the $100 billion in quarterly net withdrawals at First Republic Bank and the legislative effort to approve an increase to the urgent $31.6 billion national debt ceiling.

For Bitcoin investors, a financial crisis is a net positive as it forces the U.S. Federal Reserve to expand its emergency funding programs and take out additional unprofitable long-term debt from the system.

Cryptocurrency traders are uncomfortable with the regulatory environment, and the April 25 statement from the New York Federal Reserve further added to the uncertainty. The guidelines disclosed could potentially hinder the USD Coin (USDC) stablecoin issuer Circle’s access to the Fed’s securities reverse-repurchase program, the safest vehicle to get yield on deposits.

Unfortunately, there is no way to predict how the banking crisis will unfold or the timeline for regulatory actions against exchanges and stablecoin issuers. On the other hand, "easy money" policies are well known to every investor as extremely beneficial for scarce assets.

Such a scenario explains why professional traders have been using the bullish Iron Condor strategy to maximize gains if Bitcoin breaks above $32,000 in May with limited risk.

Call and put Bitcoin options to hedge the bet

Buying Bitcoin futures pays off during bull markets, but the issue lies in dealing with liquidations when BTC price goes down. This is why pro traders use options strategies to maximize their gains and limit their losses.

The skewed Iron Condor strategy can yield profits above $31,400 by the end of May while limiting losses if the expiry price is below $31,000. It is worth noting that Bitcoin traded at $29,730 when the pricing for this model took place.

Bitcoin options Iron Condor strategy returns. Source: Deribit Position Builder

The call option gives its holder the right to acquire an asset at a fixed price in the future. For this privilege, the buyer pays an upfront fee known as a premium.

Meanwhile, the put option allows its holder to sell an asset at a fixed price in the future, which is a downside protection strategy. On the other hand, selling this instrument (put) offers exposure to the price upside.

The Iron Condor consists of selling the call and put options at the same expiry price and date. The above example has been set using the May 26 contracts, but it can be adapted for other timeframes.

Related: Kraken asks San Francisco court to intervene against IRS demands

Modest 6% Bitcoin price gain needed for profits

As depicted above, the target profit area is $31,420 (6% above the current $29,730 price) to $36,000 (21.2% above the current price). To initiate the trade, the investor needs to short (sell) 1.5 contracts of the $33,000 call option and 3 contracts of the $33,000 put option. Then, the buyer must repeat the procedure for the $35,000 options, using the same expiry month.

Buying 4.8 contracts of the $31,000 put option to protect from an eventual downside is also required. Lastly, one needs to purchase 7.8 contracts of the $36,000 call option to limit losses above the level.

This strategy’s net profits peak at 0.225 BTC ($6,685 at current prices) between $33,000 and $36,000, but they remain above 0.063 BTC ($1,750 at current prices) if Bitcoin trades in the $31,850 and $35,700 range.

The investment required to open this skewed Iron Condor strategy is the maximum loss — 0.063 BTC or $1,750 — which will occur if Bitcoin trades below $31,000 on May 26.

The benefit of this trade is that a wide target area is covered while providing a 357% return versus the potential loss. In essence, it provides a leverage opportunity without the liquidation risks typical from futures contracts.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Sam Bankman-Fried might get early release, suggest legal experts

Microstrategy’s Bitcoin Holdings Reach 140,000 BTC After Acquiring 1,045 More Bitcoins

Microstrategy’s Bitcoin Holdings Reach 140,000 BTC After Acquiring 1,045 More BitcoinsNine days after publicly listed company Microstrategy purchased 6,455 bitcoins, the firm’s CEO, Michael Saylor, announced the purchase of an additional 1,045 bitcoins. The business intelligence (BI) company now holds a total of 140,000 bitcoins, worth $3.97 billion. Microstrategy Buys Another Batch of Bitcoins Microstrategy has begun acquiring bitcoin (BTC) again, after purchasing 6,455 bitcoins […]

Sam Bankman-Fried might get early release, suggest legal experts

UBS Considers Acquiring Credit Suisse, Requests Government Backstop in Deal

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Sam Bankman-Fried might get early release, suggest legal experts

Fed signals a sharp rate hike in March due to inflation — Here’s how Bitcoin traders can prepare

The U.S. Federal Reserve is set to roll out a fresh interest rate hike on March 22, and options traders could use this risk-averse strategy to generate profits.

Like it or not, for crypto investors, the U.S. Federal Reserve policy on interest rate hikes and high inflation is the single most relevant measure for gauging demand for risk assets. By increasing the cost of capital, the Fed boosts the profitability of fixed-income instruments, but this is detrimental to the stock market, real estate, commodities and cryptocurrencies.

One positive aspect of the Fed's meetings is that they are scheduled well in advance, so Bitcoin (BTC) traders can prepare for those. Federal Reserve policy decisions historically cause extreme intraday volatility in risk assets, but traders can use derivatives instruments to yield optimal results as the Fed adjusts interest rates.

Another challenge for traders is they face pressure from Bitcoin being highly correlated to equities. For example, the 50-day correlation coefficient versus the S&P 500 futures has been running above 70% since Feb. 7. Although it does not state cause and consequence, it is evident that cryptocurrency investors are waiting for the direction of traditional markets.

It's also possible that Bitcoin's low emissions could prove to be a benefit as investors realize that the FED is running out of options to curb inflation. By raising interest rates even further, it could cause the U.S. government's debt repayments to spiral out of control and eventually surpass $1 trillion annually. This creates a huge incentive for Bitcoin bulls, but extreme caution is needed by those willing to make trades based on interest rate hikes.

Risk takers could benefit from buying Bitcoin futures contracts to leverage their positions, but they could also be liquidated if a sudden negative price move occurs ahead of the FED's decision on March 22. For this reason, pro traders are more likely to opt for options trading strategies such as the skewed iron condor.

A balanced risk approach to using call options

By trading multiple call (buy) options for the same expiry date, traders can achieve gains 3 times higher than the potential loss. This options strategy allows a trader to profit from the upside while limiting losses.

It is important to remember that all options have a set expiry date, so Bitcoin's price increase must happen during the set period.

Listed below are the expected returns using Bitcoin options for the March 31 expiry, but this methodology can also be applied to different time frames. While the costs will vary, the general efficiency will not be affected.

Profit / Loss estimate. Source: Deribit Position Builder

The call option gives the buyer the right to acquire an asset, but the contract seller receives (potential) negative exposure. The iron condor consists of selling the call and put options at the same expiry price and date.

As shown above, the target profit area is above $23,800, and the worst scenario is a 0.217 BTC (or $5,156 at current prices) if the expiry price on March 31 happens below $23,000.

Related: Bitcoin price enters ‘transitional phase’ according to BTC on-chain analysis

To initiate the trade, the investor must buy 6.2 contracts of the $23,000 put (sell) option. Then, the buyer must sell 2.1 contracts of the $25,000 call option and another 2.2 contracts of the $27,000 call option. Next, the investor should sell 3.5 contracts of the $25,000 put (sell) option combined with 2 contracts of the $27,000 put option.

As a final step, the trader must purchase 3.9 contracts of the $29,000 call option to limit losses above the level.

This strategy yields a gain if Bitcoin trades between $23,800 and $29,000 on March 31. Net profits peak at 0.276 BTC ($6,558 at current prices) between $25,000 and $27,000, but remain above 0.135 BTC ($3,297 at current prices) if Bitcoin trades in the $24,400 and $27,950 range.

The investment required to open this skewed iron condor strategy is the maximum loss, hence 0.217 BTC or $5,156, which will happen if Bitcoin trades below $23,000 on March 31. The benefit of this strategy is the wide profit target area, yielding a better risk-to-reward outcome than leveraged futures trading, especially considering the limited downside.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Sam Bankman-Fried might get early release, suggest legal experts

UBS Strategists Predict Minimal Impact of Upcoming Mt Gox Payouts on Bitcoin Value

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Sam Bankman-Fried might get early release, suggest legal experts

Analyst Says Duke Energy Corporation Is Studying Bitcoin Mining Applied to Demand Response

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Sam Bankman-Fried might get early release, suggest legal experts

Sony Announces Metaverse Push in Latest Annual Corporate Strategy Meeting

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Sam Bankman-Fried might get early release, suggest legal experts