Trading Strategy: 40k reclaim for BTC

While the attention is currently heavily focused on ETH flirting with all time high boosted by a remake of the Defi summer, BTC, after some challenging days he is gearing up to attempt another climb of the $40k level.

Since Christmas, BTC has been held by a support dating back to the 24th of December that brought it to ATH and another dating back to the 15th of December that caught its fall when the market corrected a bit more than a week ago down to the $30k level.
We are still currently sitting on that one, more sustainable than the other and that should bring us, if we hold firm, to the $40k level at maximum end of this week/early next week.
On top of this, we have a beautiful triangle formation that is more likely to break to the upside.

Since the beginning of the year, even if the mainstream news flow has been focused on the Bitcoin performance, the true YTD winner since has been ETH. ETH has moved YTD 46% up vs BTC. Since the 14th of January the rotation out of BTC in ETH/Defi/Alts has put BTC prices under pressure.

This is probably not the end of the bullish ETH trend and a soon to arrive break of ATH would certainly trigger a blow to the upside. That said, even if the ETH/BTC has still some upside room and could go for the 0.04 level, i think at 0.038 we have more room to the downside than the upside left.
On a more mid/long term view, the main support for ETH/BTC is closer to low 0.03.
Overall, it feels like BTC is due for a catch up. And don’t forget that Greyscale has reopened inflows for their BTC fund…

Taking into account the current high implied volatility on BTC, more than 130 IV for short term ATM options, we would be very cautious on putting straight out long volatility strategies. 10d realized in BTC is sitting close to 100 and dropping. Even if IV has been boosted by a lack of sellers, holding long volatility positions at these levels can turn out quickly to be very costly.

Considering the timeline we are looking at, the 29Jan2021 40k/42K call spread seems appropriate. With a ref at 37100, it costs around $440 dollars for a maximum profit of 2000$. It presents a 7% delta and would break even at $40450. The delta seems low but that is explained by the high volatility on those strikes. But with the high gamma in that strategy as we would approach expiry and the 40k strike, the delta would quickly rise in an upward move.

Sources:
tradingview.com
deribit.com

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