Benzinga - by Murtuza Merchant, Benzinga Staff Writer.
The Bitcoin (CRYPTO: BTC) Fear and Greed Index has shifted to a bullish stance, according to a fresh report, which emphasized a promising trading strategy amid the changing market conditions.
Event Risk And Market Movements
The week ahead poses significant event risks, including the unlocking of $800 million in PYTH (CRYPTO: PYTH) supply on May 20 and another $340 million from AVAX (CRYPTO: AVAX) on May 21, according to a report from 10x Research.
Additionally, NVIDIA's Q1 2024 earnings report is set for May 22, and the final decision on VanEck's spot ETF application is due on May 23.
Betting markets currently suggest only a 7% chance for ETF approval. Bitcoin is expected to experience a 4% price swing either way by week’s end.
Bitcoin’s price action has shown notable improvement, rebounding towards the late April resistance zone of $67,500 and surpassing the early May highs of $64,000.
A breakthrough above $67,500 could potentially lead to new all-time highs.
The report’s author Mark Thielen noted, “Our $68,300 ‘line-in-the-sand' is back in focus, as a move above could technically set off a strong rally.”
Bullish Indicators And Market Sentiment
The Bitcoin Fear & Greed Index briefly traded below 10%, a level typically associated with tactical lows in a bull market. The moving average of the index is rebounding, which could indicate a prolonged rally.
Thielen explained, “More importantly, the moving average is rebounding, which lasts for weeks or even months. Hence, a prolonged rally might occur.”
Despite the bullish sentiment, Thielen acknowledges the current market challenges.
“This bull market is still searching for a significant narrative and a theme that can ignite investor interest. Volumes are low, and interest in altcoins is nearly non-existent,” he says.
Also Read: Spot Bitcoin ETFs Are ‘Orange FOMO Poker Chips,’ Jim Bianco Warns
Trading Strategy: Balancing Risk And Reward
10x Research proposes a strategic trade involving the purchase of Bitcoin spot, selling a 100,000 strike call, and selling a 50,000 strike put for the December 2024 expiry.
Selling the call could yield 11%, while selling the put could yield an additional 6%.
“This strategy provides us with either a 17% downside buffer or 17% more yield, depending on where BTC closes in December, plus we would capture all the upside (or downside) for Bitcoin,” Thielen stated.
The report also suggests that selling a December 2024 put with a strike price of $50,000 could yield 6%, presenting a relatively low-risk strategy.
He further said, “We not only doubt Bitcoin would drop below $50,000, but we also think that Bitcoin's volatility will likely materially decline over the next few weeks and months.”
Market Outlook
While Bitcoin's downside appears limited due to stable inflation data and the Fed’s stance against rate hikes, the market structure remains complex.
Thielen believes that the current conditions could lead to a gradual increase in Bitcoin prices rather than an explosive rally.
He noted, “A more robust US stock market and the support from the U.S. Presidential election cycle could support this bullish narrative.”
Investors and market watchers will gain deeper insights into these developments at Benzinga’s Future of Digital Assets event on Nov. 19.
The event will gather industry leaders, investors, and policymakers to discuss the evolving role of digital assets in the global financial system.
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