- In the last report, a researcher at Grayscale mentioned this Bitcoin covered call strategies are an effective way to generate income in the event of market uncertainty.
- Amid positive economic data, Bitcoin saw a small bullish momentum, rising above $65,000.
- BTC is struggling to maintain bullish momentum due to volatile flows in ETFs and geopolitical tensions.
On July 15, Grayscale, a leading asset management firm, highlighted Bitcoin-covered call strategies as an effective way for investors to generate income during uncertainty in the cryptocurrency market.
Covered calls turn BTC stagnation into income
While Bitcoin is currently giving a signal of recovery, the cryptocurrency is expected to trade sideways before a full recovery. In such circumstances, a covered call strategy can allow traders to achieve amazing returns while ensuring some level of downside protection, according to Grayscale.
Zach Bandel, head of research at Grayscale, said in a statement Official job“Although we are seeing some positive signs, we cannot be certain exactly how the latest Bitcoin (BTC) bear market will play out. If the price of Bitcoin finds a permanent bottom but trades sideways before recovering, covered call strategies can provide a way to help generate income from Bitcoin’s volatility while managing exposure to spot prices. As a reminder, in a covered call strategy, an investor buys a spot position and then sells a call option against it, earning the premium.”
In a covered call strategy, a trader holds a Bitcoin spot position, and in exchange for it, the trader will sell call options. By doing this, the trader makes income from the bonus.
In the official post, Grayscale shared a hypothetical example of the end of 2026, where one researcher assumed the spot price of Bitcoin at around $65,000 with an implied volatility of 40%. In this case, traders will make an annual return of about 22%. They will earn a return above the break-even price of $58,500.
“The option premium provides income as well as downside protection, in exchange for giving up some upside if Bitcoin rises sharply. If the spot price of Bitcoin falls below the breakeven price, the covered call strategy loses money, but less than the outright put (by an amount equal to the call premium),” the post reads.
Grayscale reported that real-world BTC covered call ETFs, such as its BTCC fund, use a rolling portfolio of call options to achieve similar results.
Bitcoin rises to 3-week high on cold inflation data
On July 15, Bitcoin The coin gained upward momentum following the latest economic data, helping the cryptocurrency rise above $65,000 for the first time in the past three weeks. On Wednesday, it rose to $65,467. However, the cryptocurrency failed to sustain above this level. At the time of writing this article, BTC is trading at a near level $64,833 With a rise of 4.13% in the past seven days, according to CoinMarketCap. The cryptocurrency market cap is about $1.3 trillion.
The rise was seen following the release of weaker-than-expected US inflation data, which eased concerns about an immediate Fed interest rate increase.
According to the latest report, the CPI for June fell 0.4% from the previous month, the largest decline since April 2020. This figure brought annual inflation down to 3.5%. This is much lower than many analysts expected.
Apart from this, the Producer Price Index also faced a decline of 0.3% on a monthly basis.
Despite small gains in the past few days, Bitcoin is still struggling to create a breakout with strong upward momentum. The reason behind this is the volatile demand for BTC ETFs among institutional investors. On July 14, U.S.-traded Bitcoin ETFs recorded net inflows of about $181 million, according to Father’s side. However, on July 13, it recorded outflows of $424.7 million.
Year-to-date, U.S.-traded Bitcoin ETFs have seen cumulative net inflows rise to more than $51 billion, with more than 636,000 BTC in the ETFs.
The overall cryptocurrency market is still facing high volatility due to the increasing global tension in the Middle East due to the crisis The American-Iranian war. This week, Iran launched new missile and drone attacks on countries in the Middle East such as the United Arab Emirates. Kuwait, Bahrain and Oman in response to the American attack. This attack has once again sparked unrest in the financial world as it could disrupt global energy supplies.
