Good Morning. Crypto shot out of a cannon to start the month of April, but has been consolidating ever since. In terms of BTC, on April 1st we saw a sharp rally for several hundred points before coming into any walls of resistance. Prices have remained range bound for the month, probing between $4,800 and $5,600. In our view, as headlines of the DACC acquisition by Bakkt yesterday would be bullish for the space, BTC has not seen a significant rally upon this news. Our view for the short term is we are sitting in no-man’s-land here for BTC. A rally through the recent highs of $5,600 would lead us to believe the next level of resistance is in the $6000-$6,200 area. A sell-off below $4,800 would probably trigger a ‘gap’ lower back down to the $4,200 level where we should see some new support tested.
The BTC K (5/31/19) Options are pricing a straddle of ~$660, roughly 57% vol. Meanwhile the BTC M (6/28/19) Options are pricing a straddle of ~$990, about 59% vol. These levels are in line with vols seen since the beginning of this year.
As we have seen on several occasions now, BTC tends to lull traders to sleep in these consolidation ranges before making a swift (and sometimes overnight) move that trigger stops and do not allow the human trader to participate as the momentum is too fast. Trading these consolidation ranges could be the best strategy while having stop-loss orders placed in for the potential breakout moves. If one does not like to trade the range, then options should be used to take a directional view on a breakout, as the leverage from these derivatives can give you the best risk-reward profile.