Trump’s Bitcoin Bet: Will the U.S. Treasury Go All In?

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Former President Donald Trump pledged to create a strategic bitcoin reserve and replace the SEC Chair if elected, while Senator Cynthia Lummis plans to propose a bill for the U.S. Treasury to purchase 1 million bitcoins. Technical analysis shows Bitcoin’s price breaking out and maintaining an upward trend amid bullish market sentiment.

Call Butterfly Spread

The proposed strategy is a Call Butterfly Spread strategy. A Butterfly Spread with Calls is a three-part strategy that is created by buying one Call at a lower strike price, selling two Calls with a higher strike price and buying one Call with an even higher strike price.

You can consider executing this strategy if you are anticipating a bullish environment to continue for BTC.

Trade Structure

(OTM Call) Buy 1x BTC-02AUG24-$72,000-C @ $780
(OTM Call) Sell 2x BTC-02AUG24-$74,000-C @ $399
(OTM Call) Buy 1x BTC-02AUG24-$76,000-C @ $204

Target: Spot level = $74,000

Payouts

Maximum Profit: $1,814/BTC
Debit of Strategy: $186BTC

Why are we taking this trade?

Former U.S. President Donald Trump reiterated his support for cryptocurrency in a speech at the Bitcoin 2024 conference in Nashville on Saturday. The conference featured numerous esteemed speakers discussing the significance of crypto and the potential for increased investments in Bitcoin, which many traders are eager to capitalize on. During his address, Trump, the Republican presidential nominee, promised that if elected in November, he would establish a “strategic bitcoin reserve” and prevent the U.S. from selling its current holdings. He also pledged to remove the incumbent Securities and Exchange Commission Chair, Gary Gensler (Source: The Block).

In a separate development, Senator Cynthia Lummis announced in an interview with The Block over the weekend that she plans to introduce a bill next week directing the U.S. Treasury to purchase 1 million bitcoins, valued at approximately $68 billion, over five years. Following Trump’s speech, a Hong Kong lawmaker advocated for including Bitcoin in financial reserves.

Trump also reiterated his previous promises to commute the sentence of Silk Road founder Ross Ulbricht and halt the development of a Central Bank Digital Currency (CBDC) by the U.S. government.

From a technical analysis perspective, the attached 4-hour Bitcoin price chart shows a significant breakout. The supply zone at $67,200 has been breached following the formation of a flag and pole pattern, indicating an upward trend. As highlighted in my previous insights, Bitcoin has successfully maintained its upward trend despite some minor retracements. I anticipate this trend to continue, given the bullish sentiment in the crypto industry.

For traders, looking to capitalize on this analysis in BTC, implementing a Call Butterfly Spread strategy could be advantageous.

To execute this approach, traders can purchase a Call option (e.g., $72,000) while simultaneously selling double the quantity of Calls at a higher strike price (e.g., $74,000) and buying a Call at an even higher strike price (e.g., $76,000).

If the BTC price is at $74,000 when the options expire on August 2nd, traders will achieve maximum profit from this strategy.

In case of a market downturn, the potential loss is limited to the initial debit of $186.

How to take this trade on Deribit?

Step 1: Go to Combo books under the Strategy tab & Create combo.

Step 2: Click RFQ and send your order to the Combo List.

Step 3: Go to Combo list (BTC), click on your Strategy and execute.

Disclaimer

This report must not be used as a singular basis of any trading decision. The document includes analysis and views of our research team. The document is purely for information purposes and does not constitute trading recommendation/advice or an offer or solicitation of an offer to buy/sell any contract.

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