Author Archives: Julia Wheeler

The “Yield And Volatility” Ratio And Creating Major Bitcoin Price Upside

Anyone who is a Bitcoin follower will notice that market sentiment can change in a matter of seconds. One tweet away from a bearish market and one Tesla earnings report away is a bull market. This market is as emotional as any you’ll ever see. It begs the question: What metrics can we use to measure where we stand on this emotional spectrum.

One thing I keep track of is the ratio between calls and puts trading in a particular month. Let’s call this the “yield and volatility ratio”. It takes into account the distance between like-priced puts and calls from spot bitcoin’s current price. Then it divides the difference between calls and spot bitcoin prices by the price between puts and spot bitcoin. This metric’s value is affected by many factors, including the implied volatility of options skew and futures yield curve. This ratio can provide a good indication of the current market forecast for bitcoin’s price. What is the sentiment? Are bitcoins headed for the moon? Or are we in for a three year bear run?

This is best illustrated using examples from the last few months. On May 11, 2021, with the bitcoin spot price at $55,000, let’s look at what the ratio was for the September 24, 2021, expiration on Deribit:

The $50,000 put traded at the same price that the $80,000 call. The put strike was therefore $5,000 off the spot bitcoin price and the call strike $25,000 below the spot bitcoin. Divide the difference between the spot bitcoin price and the call strike ($25,000) by the difference between the put strike ($5,000) and we get a ratio of 5:1.

This metric gives a score of five to one, which is very high. You may recall that bitcoin was at its peak bull-market phase. To take advantage of these market conditions, you can use the following trade ideas:

This strategy would give you the following exposure to Bitcoin until your options expire:

You are short at $55,000 but you can only lose money up until the $50,000 put strike. Your losses are then stopped and you can lose as much as $5,000. You will make a profit up to the $80,000 price point, at which point you can only make $25,000 profit. This means that you can make $25,000 profit (45% more), and only risk $5,000 (9%) loss. You can see the 5:1 ratio again.

These odds are appealing to me. Because I am bullish on bitcoin for the long-term, it can be difficult to find ways to hedge your long term exposure. I don’t enjoy selling spot bitcoin and I tend to be long-term bullish on bitcoin overall. When the call/put ratio reaches levels of 5:1, I enjoy selling calls and buying put to hedge a portion of my overall exposure.

Compare that to the June 21st 2021 date. You could use the following inputs to interpolate the July 30th 2021 ratio: With the bitcoin spot price at $36,000 the $32,000 puts would be equal to the $41,000 calls. The ratio is now 1.25:1.

What trade idea would you have in this market? I prefer to do the opposite of what is suggested above. It is a good idea to buy calls and then sell the puts. You can only lose $32,000 on the put if you assume that BTC rises to $0. The upside is endless. It doesn’t make any sense to increase this ratio to 1:1, given bitcoin’s ability to go parabolic.

How does the current ratio look? The ratio has increased as we have seen yields rise on the most recent rally. This is especially true if you look further back in time. The December 31 expiry ratio is 2.80:1. This is only an approximate ratio and can change depending on the initial call you make or which put strike you take. To ensure consistency, I prefer to choose a put that is 10% lower than spot and then solve for the call. Although it has rebounded from its recent lows, there is still potential for expansion in the months ahead, particularly when futures markets offer higher yields. Selling calls or buying put is a good way to get rid of some of the ratio. However, I wouldn’t do it often as the ratio is likely to rise.

The most important thing is to be in control of your emotions. You must keep your head up and accept the hand dealt to you by the market.

When it comes to bitcoin mining, can Alberta become the new China?

Alberta could be a potential new crypto hub in Canada

Since June, when Beijing increased its cryptocurrency crackdown, a mass exodus has been taking place from China. Local authorities ordered energy companies to stop power supply to bitcoin farms. This left miners with little choice but to leave for more crypto-friendly pastures.

The miners were not left in limbo, however, for too long. Many of them found new homes in America, Russia, and Kazakhstan. Alberta has also been on the radar since mid-July. The Nevada-based Black Rock Petroleum Company made a deal to deliver up to 1 million bitcoin mining machines into three natural gas plants in southern Alberta.

The company did not give a specific time frame, but stated in a press release that they were looking to sign 24-month contracts and have the option of extending them. The Quirk Creek natural gas station, located southwest of Calgary will host the first 200,000 units. It is currently operated by Calgary’s Caledonian Midstream Corporation. Black Rock acquired it in July.

Brian Mosoff, chief executive officer at Canadian crypto firm Ether Capital, and an entrepreneur focusing on cryptocurrencies, stated to the Financial Post that Bitcoin miners will naturally gravitate toward energy sources with low rates of interest.

Mosoff stated that Alberta was a great place. It really boils down to whether they can co-locate near another business that emits energy as a byproduct of another service they are performing. Or can they make a deal locally with the government to source megawatts at a specific price and lock it in for a few years. That could be done in Alberta.

Mosoff said that Ontario and Quebec are also hubs where miners can set up shop to find these benefits. However, Alberta has the best energy rates.

The deal will provide miners with a steady supply of energy at low costs. However, it could also be a boon to energy companies looking for lucrative business opportunities. This is especially important as the pandemic has slowed global travel and reduced energy demand. Companies in the fossil fuel sector are also under pressure from governments that push for more renewable energy sources.

An upstate New York coal power plant that was inactive received a new lease of life earlier this year to allow it to continue crypto mining operations. A Montana coal plant was also upgraded to make the same move. This deal could be a boost for Alberta’s energy sector.

Binance And Alchemy Partnership Will Enable Bitcoin Payments On Shopify, ACH Token Rallies 122%

Binance, the largest crypto exchange in terms of trading volume, has partnered up with Alchemy Pay to create the first hybrid fiat/digital currency gateway.

What happened? According to a Press releaseThe partnership will allow for a payment bridge between fiat and crypto through Binance Pay wallet on Wednesday.

Binance Pay is available for peer-to-peer and merchant-based transactions. Users and merchants have access to over 40 supported cryptocurrency options.

It will also allow users and merchants worldwide to send and receive cryptocurrency payments without having to pay any handling fees.

Why it matters: Alchemy has a network of 2 million merchants in 18 countries. It also includes e-commerce companies.Shopify Inc (NYSE:SHOP) and Canadian footwear brand Aldo.

Alchemy Pay was established in 2018 with the aim of creating a hybrid fiat/crypto payments system that businesses can use on all existing systems.

Blockchain-based projects have their own identity EthereumGovernance token based on -based (CRYPTO ETH: ETH).Alchemy pays (CRYPTO : ACH), which rallied 127% overnight. ACH traded at $0.02708 as of the writing of this article.

“When we started, the market’s total value was less than one tenth of a per cent of today. John Tan, CEO of Alchemy Pay, stated that electronic payments other than the $80 trillion fiat currency were almost unknown to the rest of the world.

“Alchemy Pay’s partnership for Binance Pay wallet greatly expands the practical backbone apps we build between crypto and fiat,” he said.

Jeff Bezos Directs Amazon to Accept Bitcoin and Other Popular Cryptocurrencies: Report

City A.M. published a report following Amazon’s announcement that it was looking for a blockchain and digital currency lead.

According to a source close to Amazon, the news outlet claimed that the company was looking into accepting bitcoin payments by the end of 2018. Additionally, it is currently investigating its own token for 2022.

The insider claimed that Amazon isn’t simply trying to establish cryptocurrency payment solutions in the future. He added that the company’s crypto project was a ‘full-on, well-discussed and integral part of Amazon’s future mechanism. She went on:

It all starts with bitcoin. This is the first major stage of the crypto project. The directive comes from Jeff Bezos, who is at the top of the chain.

The insider said that the entire project was almost ready to go. He also stressed that it won’t take too long as the plans are already in place and that they’ve been working on them since 2019.

She noted that Amazon’s directors are keen to add support for big cryptocurrencies once a secure and fast method of bitcoin payments is established.

Before they bring eight of the most well-known cryptocurrencies online, Ethereum, Cardano and Bitcoin Cash will be next.

The insider said that Amazon is exploring the possibility of launching its own cryptocurrency in addition to accepting crypto payments. She added that ‘When all the crypto ducks have been lined up, there is another twist to push Amazon even further in its favour – a Native Token.’

After more than a year of using cryptocurrency to make payments for goods, it’s becoming increasingly likely that tokenization will become a reality.

She explained that this infrastructure can be used to pay for goods or services, and earn tokens through a loyalty program.

Billionaire Magellan boss says bitcoin going to zero

Douglass stated that he was expecting to be widely criticized for his views on crypto. But he didn’t care.

“I cannot tell you when it will happen, by the way. It might happen soon, or it may happen in the future. It will most likely be the case study in irrationality 20 years from now.

The fund manager also identified Tesla and other meme stocks as areas of reckless speculation, where share prices do not reflect the true value of the business.

Tesla, the electric vehicle manufacturer, has seen its shares rise 14 fold over the past five year. Musk’s founder also acquired 58.3million Twitter followers. AMC, GameStop and Nokia were also popular after they gained viral attention via social media platforms such as Twitter and Reddit, as part of the 2020 retail investor phenomenon.

Uncertain outlook

Magellan had no exposure so Mr Douglass wasn’t concerned about asset price bubbles. He warned that cryptocurrencies’ popularity could cause a contagious impact on sentiment. This is because contagion can lead to a loss of investor confidence and market disruptions.

Magellan’s portfolio positioning defense and investment performance over the past twelve months was also supported by Magellan on the basis that there were mounting risks of an equity correction.

Magellan’s flagship global funds returned 10.8% for the year ended June 30, against a 27.5 percent return for its benchmark, the MSCI All World Index.

He said, “I suppose it’s a bit of a wake up call in Australia with Sydney & Melbourne back in a strict lockdown.” “We thought that this was over. We were about to be vaccinated. We could get an escaped variant of this virus. One that escapes the vaccines The rapid spread of this delta one is alarming, but vaccines seem to still be effective against death.

Rates and inflation

According to the fund manager, inflation is another unknown risk that will affect markets in the coming 12 months.

According to US inflation data, prices rose at an unprecedented pace for June . This was due to a wide range of consumer goods, including petrol and cars.

Douglass warns that if June’s inflation spike proves to be more than temporary, the only outcome will be market-shaking higher rates and recession. “And that would make inflation very problematic for equity investors all over the globe.

According to the fund manager, rising risk-free rates are a sign of inflation and could also affect the solvency of many corporations that have taken on debt in the last three to five years.

He said that they’ve increased their leverage and their credit ratings, which has led to a huge rise in speculative-grade junk bonds. These types of credit have been sought after by people because they offer yield and interest rates are low.

Investors should not discount to zero the possibility that yields on benchmark risk-free rate US 10-year Treasuries rise from 1.5 to 3.5% over the medium term, according to the fund manager.

Investors demand greater compensation for uncertain future cash flows by equities, as risk-free rates rise. This is done via lower valuations. Warren Buffett once said that interest rates are the gravity in markets. He said that higher rates are associated with lower asset prices.

“And [with] lower interest rate, which we have all seen over the past decade, asset prices has soared.”