Bitcoin
BTC$22 830.69

-4.00%

Ethereum
ETH$1 567.24

-4.81%

Tether
USDT$1.000078

0%

Binance Coin
BNB$307.00

-3.30%

USD Coin
USDC$1.000097

0%

XRP
XRP$0.394679

-4.64%

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


15 Mar 2022

#Ethereum

Traders who believe ETH will recover but unlikely surpass $3,800 ahead of May can benefit from the skewed iron condor strategy. 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

Unfortunately, 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.

In 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 upside

A 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.

The "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 $3,800

The 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.


Related

Five tips for investing during a global recession
Five tips for investing during a global recession
A beginner’s guide to NBA Top Shot NFTs
A beginner’s guide to NBA Top Shot NFTs
Soaring growth of Ethereum layer-2 networks set to continue in 2023
Soaring growth of Ethereum layer-2 networks set to continue in 2023
Redeeming physical NFTs: Easier said than done?
Redeeming physical NFTs: Easier said than done?
The crypto market in retreat
The crypto market in retreat
Thanks to Ethereum,
Thanks to Ethereum, "altcoin" is no longer a slur
NFT rides shotgun as Red Bull Racing closes out F1 season
NFT rides shotgun as Red Bull Racing closes out F1 season
Ether staking withdrawal schedule removal faces harsh criticism
Ether staking withdrawal schedule removal faces harsh criticism
NFTs are the key to turning passive fandom into an active community
NFTs are the key to turning passive fandom into an active community

Top Cryptocurrencies with Price Predictions

# Crypto Prediction Accuracy CVIX Price 24h 7d Market Cap 7d price change
1 Bitcoin (BTC) BTC Bitcoin predictions 60% 78 $22 830.69 -4.00% -0.52% $440 116 562 399 BTC 7 days price change
2 Ethereum (ETH) ETH Ethereum predictions 62% 83 $1 567.24 -4.81% -3.79% $191 789 399 777 ETH 7 days price change
3 Tether (USDT) USDT Tether predictions 96% 1 $1.000078 0% -0.01% $67 781 342 385 USDT 7 days price change
4 Binance Coin (BNB) BNB Binance Coin predictions 71.6% 62 $307.00 -3.30% 0.45% $48 475 686 080 BNB 7 days price change
5 USD Coin (USDC) USDC USD Coin predictions 95.6% 1 $1.000097 0% 0.02% $42 712 574 255 USDC 7 days price change
6 XRP (XRP) XRP XRP predictions 68.4% 65 $0.394679 -4.64% -7.19% $20 051 109 625 XRP 7 days price change
7 Binance USD (BUSD) BUSD Binance USD predictions 93.2% 1 $1.000027 -0.04% -0.01% $15 732 612 269 BUSD 7 days price change
8 Cardano (ADA) ADA Cardano predictions 63.6% 72 $0.372216 -6.14% -0.88% $12 876 317 286 ADA 7 days price change
9 Dogecoin (DOGE) DOGE Dogecoin predictions 70% 64 $0.088159 -2.33% -0.57% $11 696 160 812 DOGE 7 days price change
10 Lido stETH (STETH) STETH Lido stETH predictions 91.2% 1 $2 941.39 -0.40% -3.32% $10 258 752 564 STETH 7 days price change
11 Polygon (MATIC) MATIC Polygon predictions 65.6% 73 $1.086506 -7.74% 9.11% $9 489 885 842 MATIC 7 days price change
12 Solana (SOL) SOL Solana predictions 56.8% 94 $23.94 -8.40% -1.81% $8 897 955 616 SOL 7 days price change
13 Polkadot (DOT) DOT Polkadot predictions 59.2% 81 $6.19 -6.46% -5.92% $7 131 777 560 DOT 7 days price change
14 Litecoin (LTC) LTC Litecoin predictions 70.8% 55 $91.25 -4.07% 1.30% $6 585 562 085 LTC 7 days price change
15 Wrapped TRON (WTRX) WTRX Wrapped TRON predictions 66% 72 $0.062203 -2.41% -0.99% $6 324 607 060 WTRX 7 days price change

Be the first to receive Cryptocurrency Price Predictions and Forecasts daily

Get cryptocurrency price predictions, forecasts with analysis and news right to your inbox.

© 2015-2023 Crypto-Rating.com

The usage of this website constitutes acceptance of the following legal information. Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website, including information about the cryptocurrencies and bitcoin is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Crypto Rating shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about cryptocurrencies. The entire responsibility for the contents rests with the authors. Reprint of the materials is available only with the permission of the editorial staff.