Bitcoin has recently experienced a stall in its strong rally, despite favourable US economic data and lower-than-anticipated inflation. Growth expectations and liquidity have been key macro drivers since the recent market bottom in April.
The upcoming August 1 tariff deadline may lead to market caution, but potential positive outcomes remain possible. With limited bearish drivers, the tendency for Bitcoin could still be upward.
Futures risks include tariff-related growth scares or shifts in interest rate expectations. On the 4-hour chart, a robust support zone around $116,000 has seen several rejections.
A pullback to this area could prompt buyers to act, with a possible rally to new highs, provided support holds. Sellers may aim for a breakdown to the next trendline near $110,000 if the support fails.
Based on the analysis, we see the current consolidation as a temporary pause rather than a reversal of the trend. Recent data reinforces the positive macro drivers mentioned, with spot Bitcoin ETFs seeing net inflows of over $1.8 billion in the first week of June 2024 alone. This sustained institutional demand provides a strong floor for prices and supports a bullish outlook.
Mr. Dellamotta correctly identifies the August tariff deadline as a source of uncertainty, and we should prepare for potential volatility. Historically, heightened trade tensions under Mr. Trump have sometimes led to erratic price action across all markets, though digital assets occasionally benefited from safe-haven flows. Derivative traders should therefore remain defensive but view significant dips caused by macro headlines as potential buying opportunities.
For traders sharing this optimistic view, we believe buying call options with strikes above the current all-time high is a sound strategy. The support zone noted in the analysis, which we identify around the $66,000 level, presents a key area to initiate these positions. Using call spreads would allow for a defined risk, capturing upside if the market breaks out as anticipated.
To hedge against a breakdown, purchasing put options with strikes below the $66,000 support level is advisable. Should the market fail to hold this line, these positions would profit from a slide towards the next support zone near $60,000. This provides a cost-effective insurance policy against an unexpected growth scare or a hawkish shift in interest rate policy.
The current slowdown in momentum has compressed implied volatility, making options relatively cheaper. We see this as an opportunity to build positions before the next major price swing. Buying straddles or strangles could be an effective way to trade the expected increase in volatility, regardless of the direction.
