Autor Cointelegraph By Marcel Pechman

How professional Ethereum traders place bullish ETH price bets while limiting losses

How professional Ethereum traders place bullish ETH price bets while limiting losses

Uverejnil používateľ | mar 15, 2022 |

Being bullish on Ether (ETH) over the past four months did not pay off as its price dropped 44% from $4,600. The decentralized finance (DeFi) applications growth that fueled the rally faded away, partially due to network congestion and average transaction fees of $30 and higher.The cool-off period can also be attributed to excessive expectations as the fee burn mechanism implemented in August 2021 with the London hard fork. After drastically reducing the daily net issuance, investors jumped to the conclusion that Ether would become “ultrasound money.”The Ethereum network burned more ETH over the last 24 hours than was issued by both the PoW (eth1) and PoS (eth2) networks.This is the first time this has happened since EIP-1559 went live less than 3 months ago.ETH is ultra sound money — sassal.eth (@sassal0x) October 28, 2021Unfortunately, history shows that “hard money” requires multiple decades of reliable monetary policy. For example, the Euro currency was launched to the public in 2002 despite periods of negative issuing in 2014 and 2019. Yet, its purchasing power has failed to hold ground against hard assets like gold or real estate.Case-Shiller U.S. Home Price Index/EUR (orange, left) & Gold/EUR (blue). Source: TradingViewIn light of the 4-month prolonged underperformance, one could buy some cheap ultra-bullish call (bull) $4,000 ETH options for May for $68. However, with 75 days left for expiry, odds of a 55% rally from the current $2,570 are slim.It seems more prudent to bet on a positive price change, but be more selective of your target range. That is precisely how professional traders use the “iron condor” options strategy.Reduced losses by limiting the upsideA total of 10.2 million ETH have been staked into the Eth2 (consensus layer) deposit contract and investors seem confident about the proof-of-stake migration. Furthermore, mitigating the Ethereum network’s biggest hurdle, i.e. scaling, could undoubtedly cause ETH price to skyrocket.Finding a strategy that maximizes gains up to $3,600 by May 27 seems prudent. On the other hand, hedging for a negative 7% performance is also wise considering the uncertainty regarding United States President Joe Biden’s crypto regulatory efforts. Even though the executive order signed on March 9 did not announce any restrictive measures, it undoubtedly laid the groundwork for a more focused federal oversight.In that sense, the skewed “Iron Condor” options strategy perfectly fits such a slightly bullish scenario.Ether options Iron condor skewed strategy returns. Source: Deribit Position BuilderThe “Iron Condor” sells both the call (bull) and put (bear) options at the same expiry price and date. The above example has been set using the ETH May 27 options at Deribit.ETH profit zone is between $2,600 and $3,800The investors should initiate the trade by shorting (selling) 2 contracts of the $3,000 call and put options. Then, the trader needs to repeat the procedure for the $3,200 options. To protect from extreme price movements, a protective put at $2,400 has been used. Consequently, 5.20 contracts will be necessary depending on the price.Lastly, just in case Ether’s price rips above $4,000, the buyer will need to acquire 2.10 call option contracts to limit the strategy’s potential loss.The number of contracts on the above example aims for a maximum ETH 0.63 gain and a potential ETH 0.40 loss. This strategy yields a net profit if Ether trades between $2,600 and $3,820 on May 27.Using the skewed version of the Iron Condor, an investor can profit as long as the Ether price increase is lower than 49% by expiry.The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

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Bitcoin's got 3 strikes, but investors remain calm despite price drop

Bitcoin's got 3 strikes, but investors remain calm despite price drop

Uverejnil používateľ | mar 14, 2022 |

After Bitcoin (BTC) faced its third consecutive rejection, investors became more confident in adding altcoin positions. For the leading cryptocurrency, the path to $50,000 appears more challenging than previously expected.According to Euronews Next, on March 14, the European Union rejected a proposed rule that could have banned the energy-intensive proof-of-work (PoW) mining algorithm used by Bitcoin and other cryptocurrencies. Several EU parliamentarians have been pushing to ban PoW mining over energy concerns.BTC/USD price at FTX. Source: TradingViewIn terms of performance, the aggregate market capitalization of all cryptos was relatively flat over the past seven days, registering a modest 0.4% gain to $1.77 trillion. However, the apparent lack of performance in the overall market does not represent some mid-capitalization altcoins, which managed to gain 17% or more in one week.Bitcoin presented a 2.5% gain over the previous seven days, while the vice-leader Ether (ETH) increased 3.6%. However, they were no match for the altcoin rally that happened. Below are the top gainers and losers among the 80 largest cryptocurrencies by market capitalization.Weekly winners and losers among the top-80 coins. Source: NomicsTHORChain (RUNE) rallied after enabling synthetic tokens on March 10. Those derivatives are pegged to the value of other underlying collateralized assets. In THORChain’s version, the project has opted to back its synths with 50% of the underlying asset and 50% in RUNE.Privacy tokens ZCash (ZEC) and Monero (XMR) rallied as United States President Joe Biden signed an executive order on March 9 focused on establishing a regulatory framework for crypto — mentioning its possible role in circumventing sanctions.Lastly, Terra (LUNA) rallied after Terraform Labs donated $1.1 billion to Luna Foundation Guard’s (LFG) reserves on March 11. LFG was launched in January as part of a broader effort to grow the Terra ecosystem and improve the sustainability of the network’s stablecoins. On the other hand, Fantom (FTM) led the worst performers after prominent Fantom Foundation team members Andre Cronje and Anton Nell announced their departure.Meanwhile, Celo (CELO) suffered a hack on its third-party email service on March 10. A phishing communication was sent to all of its 25,741 users, but the attack was quickly investigated, and the Celo Foundation posted alerts across its social channels.Tether premium indicates resilience from retailThe OKX Tether (USDT) premium is a good gauge of China-based retail trader crypto demand. It measures the difference between China-based USDT peer-to-peer trades and the official U.S. dollar currency.Excessive buying demand tends to pressure the indicator above fair value, which is 100%. On the other hand, Tether’s market offer is flooded during bearish markets, causing a 4% or higher discount.Tether (USDT) peer-to-peer vs. USD/CNY. Source: OKXCurrently, the Tether premium stands at 100.7%, which is neutral. Still, there has been a consistent improvement over the past two months. This data signals that retail demand is picking up, which is positive considering that the total cryptocurrency capitalization dropped 50% between Jan. 1 and March 14.Funding rates show a lack of excitementPerpetual contracts, also known as inverse swaps, have an embedded rate usually charged every eight hours. Perpetual futures are retail traders’ preferred derivatives because their price tends to track regular spot markets perfectly.Exchanges use this fee to avoid exchange risk imbalances. A positive funding rate indicates that longs (buyers) demand more leverage. However, the opposite situation occurs when shorts (sellers) require additional leverage, causing the funding rate to turn negative.Seven-day accumulated perpetual futures funding rate on March 14. Source: CoinglassNotice how the accumulated seven-day funding rate is uneventful in most cases. Such data indicates a balanced leverage demand between longs (buyers) and sellers (shorts). For example, Polkadot’s (DOT) negative 0.30% weekly rate equals 1.2% per month, which is not a burden for traders building futures’ positions. Typically, when there’s an imbalance caused by excessive pessimism, that rate can easily surpass 5% per month. Some might say that the third failure to sustain Bitcoin prices above $42,000 was the nail in the coffin for the bulls, as the cryptocurrency failed to display strength during a period of global macroeconomic uncertainty and a massive commodities rally.Still, there are no signs of bearishness from Asian retail traders, as measured by the CNY Tether premium, and there is no indication of pressure from leverage shorts (sellers) on futures markets.The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

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Bitcoin derivatives metrics reflect traders’ neutral sentiment, but anything can happen

Bitcoin derivatives metrics reflect traders’ neutral sentiment, but anything can happen

Uverejnil používateľ | mar 11, 2022 |

Bitcoin’s (BTC) last daily close above $45,000 was 66 days ago, but more importantly, the current $39,300 level was first seen on Jan. 7, 2021. The 13 months of boom and bust cycles culminated with BTC price hitting $69,000 on Nov. 10, 2021.It all started with the VanEck spot Bitcoin exchange-traded fund being rejected by the United States Securities and Exchange Commission (SEC) on Nov. 12, 2020. Even though the decision was largely expected, the regulator was harsh and direct on the rationale backing the denial.Curiously, nearly one year later, on Nov. 10, 2021, cryptocurrency markets rallied to an all-time high market capitalization at $3.11 trillion right as U.S. inflation as measured by the CPI index hit 6.2%, a 30-year high.Inflation also had negative consequences on risk markets, as the U.S. Federal Reserve acknowledged on Nov. 30, 2021, that inflation is more than just a “transitory” problem and hinted that tapering could occur sooner than expected.More recently, on March 10, the U.S. Senate passed a $1.5 trillion package, which now awaits President Joe Biden’s signature. The new money is the first budget increase since former President Donald Trump left office.Data shows pro traders are not willing to hold leveraged longsTo understand how professional traders are positioned, including whales and market makers, let’s look at Bitcoin’s futures and options market data. The basis indicator measures the difference between longer-term futures contracts and the current spot market levels. The Bitcoin futures annualized premium should run between 5% to 12% to compensate traders for “locking in” the money for two to three months until the contract expiry. Levels below 5% are extremely bearish, while the numbers above 12% indicate bullishness.Bitcoin 3-month futures annualized premium. Source: Laevitas.chThe above chart shows that this metric dipped below 5% on Feb. 11 and hasn’t yet shown signs of confidence from pro traders.Still, one would not be wrong in assessing that an eventual break of the $44,500 resistance would catch those investors off guard, creating a strong buying activity to cover short positions.Options traders are less worried about further downside riskCurrently, Bitcoin seems pretty undecided near $40,000, making it difficult to discern a direction in the market. The 25% delta skew is a telling sign whenever arbitrage desks and market makers overcharge for upside or downside protection.If those traders fear a Bitcoin price crash, the skew indicator will move above 10%. On the other hand, generalized excitement reflects a negative 10% skew. That is precisely why the metric is known as the pro traders’ fear and greed metric.Bitcoin 30-day options 25% delta skew: Source: Laevitas.chAs displayed above, from Feb. 28 until March 8, the skew indicator ranged between 7% and 11%. Albeit not precisely signaling fear, these option traders were overcharging for downside protection by a wide margin.Related: Bitcoin spikes above $40K as Russia sees ‘positive shifts’ in Ukraine war dialogueThe past three days showed a remarkable improvement and currently, the 4% delta skew shows more of a balanced situation. From the BTC options markets perspective, there’s a similar risk for unexpected upward and downward price swings.The mixed data from Bitcoin derivatives offer an interesting opportunity for bulls. The cheap futures premium offers long leverage opportunities at a relatively low cost and the downside protection is running at its lowest level in thirty days.The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

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Polygon’s focus on building L2 infrastructure outweighs MATIC’s 50% drop from ATH

Polygon’s focus on building L2 infrastructure outweighs MATIC’s 50% drop from ATH

Uverejnil používateľ | mar 10, 2022 |

After a devastating 50% correction between Dec. 25 and Jan. 25, Polygon (MATIC) has been struggling to sustain the $1.40 support. While some argue this top-15 coin has merely adjusted after a 16,200% gain in 2021, others point to competing scaling solutions growth.MATIC token/USD at FTX. Source: TradingViewEither way, Polygon (MATIC) remains 50.8% below its all-time high at an $11 billion market capitalization. Currently, the market cap of Terra (LUNA) stands at $37 billion, Solana (SOL) is above $26 billion, and Avalanche (AVAX) is at a $19 billion market value.A positive note is that Polygon raised $450 million on Feb. 7, and the funding round was backed by some of blockchain’s most considerable venture funds, including Sequoia Capital.Polygon offers scaling and infrastructure support to Ethereum Virtual Machine-based (EVM) decentralized applications. Besides, it is not plagued by the high transaction fees and network congestion that impact the Ethereum network.However, as Proof-of-Stake layer-1 networks emerged and offered low-cost smart contract capabilities, it vastly increased the competition for Ethereum network decentralized finance (DeFi), non-fungible token minting, marketplaces, crypto games, gambling, and social applications.In comparison, Terra’s total value locked increased by 340% between July and December 2021, reaching $12.6 billion. Similarly, Avalanche’s smart contracts deposits increased from $185 million to $11.11 billion in the same period.The use of Polygon’s scaling solution is decliningPolygon’s primary DApp metric started to display weakness in August 2021 after the network‘s TVL dropped below 4 billion MATIC.Polygon Total Value Locked, MATIC. Source: DefiLlamaThe chart above shows how Polygon‘s DApp deposits peaked at 7.4 billion MATIC in July 2021, then drastically declined over the next couple of months. In dollar terms, the current $3.5 billion TVL is the lowest number since May 2021. These figures represent less than 5% of the aggregate TVL (excluding Ethereum), according to DefiLlama data.Another positive is that on March 9, Ankr, a multi-chain toolkit for blockchain infrastructure, enabled a token bridge between Ethereum and Polygon. The first release will allow the aMATICb liquid staking token to be sent and stored. This enables users to earn additional layers of rewards on DeFi platforms.To confirm whether the TVL drop in Polygon is troublesome, one should analyze DApp usage metrics. Some DApps such as games and collectibles do not require large deposits, so the TVL metric is irrelevant in those cases.Polygon DApps 30-day on-chain data. Source: DappRadarAs shown by DappRadar, on March 10 the number of Polygon network addresses interacting with decentralized applications grew by 5% versus the previous month. Even though Polygon’s TVL has been hit the hardest compared to similar smart contract platforms, there is solid network use in the gaming sector, as measured by Crazy Defense Heroes’ 199,260 active addresses in the last 30 days.On Nov. 16, Polygon launched its zk-STARK-powered Miden Virtual Machine, a zero-knowledge Scalable Transparent ARgument of Knowledge. Polygon has also committed over $1 billion for developing complex DeFi applications that need sensitive information redacted on digitized assets, reducing their size for fast verification by blockchain participants.The above data suggest that Polygon is holding ground versus competing chains, and those holders might not worry too much about MATIC’s 50% price correction. Polygon’s ecosystem continues to flourish, and the fact that it offers much demanded layer-2 scaling solutions for multiple industries can be viewed as a bullish factor.The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

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Softer-than-expected crypto regulation and stocks’ rebound position Bitcoin for a $42K close

Softer-than-expected crypto regulation and stocks’ rebound position Bitcoin for a $42K close

Uverejnil používateľ | mar 10, 2022 |

Bitcoin (BTC) bulls jumped in to defend the $40,000 level after a devastating retest of the $38,000 support on March 7. The confidence and momentum that was building up earlier in the month was suddenly shattered after BTC failed to break $44,500 for the third time this month on March 2.The Bitcoin price rally on March 9 has been partially attributed to this week’s expected United States inflation data report. Analysts expect another 40-year record high as the consumer price index (CPI) reaches 7.9% yearly gains.Furthermore, a statement from the U.S. Treasury Secretary Janet Yellen regarding President Biden’s executive order on digital assets was somewhat milder than expected. Although deleted from the U.S. Department of the Treasury website as it was seemingly released early by error, the order will apparently call for “a coordinated and comprehensive approach to digital asset policy.”The commodities rally was a presage for Bitcoin’s hikeConsidering that Bloomberg Commodities Index (BCOM) reached an all-time high of 134 on March 8, Bitcoin’s recent strength should not come as a surprise. Despite correcting to 129, the BCOM gains accumulated in 30 days remain at 18.5%, according to MarketWatch.According to the open interest on Friday’s options expiry, Bitcoin bulls placed heavy bets between $44,000 and $48,000. These levels might seem optimistic right now, but Bitcoin tested this level eight days ago.Bitcoin options aggregate open interest for March 11. Source: CoinGlassA broader view uses the call-to-put ratio and shows a 40% advantage to Bitcoin bulls, as the $460 million call (buy) instruments have a larger open interest versus the $330 million put (sell) options. However, the 1.40 call-to-put indicator is deceptive because most bullish bets will become worthless.For example, if Bitcoin’s price remains below $43,000 at 8:00 am UTC on March 11, only $190 million worth of those call (buy) options will be available. This effect happens because there is no value in the right to buy Bitcoin at $44,000 if it’s trading below that level.Bulls could pocket $140 million at $42,000Below are the three most likely scenarios based on the current price action. The number of options contracts available on March 11 for bulls (call) and bear (put) instruments varies depending on the expiry price. The imbalance favoring each side constitutes the theoretical profit:Between $40,000 and $42,000: 2,600 calls vs. 2,100 puts. The net result is balanced between call (bull) and put (bear) options.Between $42,000 and $43,000: 4,500 calls vs. 1,150 puts. The net result favors bulls by $140 million.Between $43,000 and $44,000: 5,100 calls vs. 700 puts. The net result favors the call (bull) instruments by $190 million.This crude estimate considers the call options used in bullish bets and the put options exclusively in neutral-to-bearish trades. Even so, this oversimplification disregards more complex investment strategies.For instance, a trader could have sold a call option, effectively gaining a negative exposure to Bitcoin above a specific price. Unfortunately, there’s no easy way to estimate this effect.Bears need BTC price below $42,000 to balance the scalesBitcoin bulls need to hold $42,000 to score a $140 million profit on March 11. Furthermore, a mere 2% price hike from the current $42,200 level is enough for Bitcoin bulls to secure a $190-million gain on Friday’s options expiry.Bears will face difficulty suppressing the price given the short-term positive sentiment of inflation expectations and lessened pressure from regulators. Currently, options markets data favor the call (buy) options.The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

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