Very few events can shake the cryptocurrency markets in a sustainable fashion that really sends Bitcoin and altcoin prices into a sharp directional movement. Ane instance is when Xi Jinping, Communist china'due south President, called for a country-wide evolution of blockchain technology in October 2022.

The unexpected news caused a 42% pump in Bitcoin (BTC), but the movement completely faded away equally investors realized People's republic of china was not altering its negative stance on cryptocurrencies. As a outcome, only a handful of tokens focused on China's FinTech manufacture, blockchain tracing, and industry automation saw their prices consolidate at college levels.

Some 'crypto news' and regulatory development have a lasting impact on investors' perceptions and willingness to interact with the crypto market. Not every i of these is positive. Take, for example, the launch of Chicago Mercantile Exchange (CME) Bitcoin futures in Dec 2022, which experts say popped the 'bubble' and led to a nearly three-year-long deport market. Despite this outcome, a positive was institutional investors finally had a regulated instrument for betting against cryptos.

Tesla's Feb 2022 announcement that it had invested $1.5 billion in Bitcoin finer inverse the perception of reluctant corporate and institutional investors and validated the "digital gold" thesis. Fifty-fifty if the price spiked to a $65,000 all-time-high and retracted all the way to $29,000, information technology helped to constitute a support level price-wise.

Believe it or not, investors have been expecting the United States Securities and Substitution Commission to approve a Bitcoin futures exchange-traded musical instrument since July 2022, when the Winklevoss brothers filed for their "Bitcoin Trust."

Grayscale's Bitcoin Trust (GBTC) was finally able to list it on OTC markets in March 2022, but numerous restrictions are applied to these instruments, limiting investor access.

A potentially positive cost trigger is coming up

With that in mind, the effective blessing of a U.S.-listed exchange-traded fund (ETF) from the SEC will probable be i of those events that volition modify Bitcoin's price forever. By expanding the field of potential buyers to the underlying asset, the event could exist the trigger that drives BTC to become a multi-billion dollar asset.

Bloomberg ETF analysts Eric Balchunas and James Seyffart issued an investor note on Aug. 24 that suggested that the SEC approval could come equally soon as Oct. Even though one could apply futures contracts to leverage their long positions, they would risk being liquidated if a sudden negative cost motion occurs ahead of the approval.

Consequently, pro traders will likely opt for an options trading strategy like the "long butterfly."

By trading multiple call (buy) options for the same expiry date, one tin achieve gains that are 3.5 times higher than the potential loss. The "long butterfly" strategy allows a trader to profit from the upside while limiting losses.

It is of import to remember that all options have a set up decease date, and as a result, the asset'south toll appreciation must happen during the divers catamenia.

Using call options to limit the downside

Beneath are the expected returns using Bitcoin options for the Oct 29 decease, only this methodology can also be applied using different time frames. While the costs will vary, the general efficiency will not be affected.

Profit / Loss estimate. Source: Deribit Position Builder

This call option gives the buyer the right to acquire an nugget, simply the contract seller receives (potential) negative exposure. The "long butterfly" strategy requires a short position using the $70,000 call option.

To initiate the execution, the investor buys 1.5 Bitcoin call options with a $55,000 strike while simultaneously selling two.iii contracts of the $70,000 call. To finalize the trade, one should buy 0.87 BTC contracts of the $xc,000 call options to avoid losses above such a level.

Derivatives exchanges price contracts in Bitcoin terms, and $48,942 was the price when this strategy was quoted.

The trade ensures limited downside with a possible 0.25 BTC gain

In this situation, whatsoever outcome between $57,600 (upwardly 17.7%) and $ninety,000 (upward 83.9%) yields a net turn a profit. For instance, a 30% toll increase to $63,700 results in a 0.135 BTC gain.

Meanwhile, the maximum loss is 0.07 BTC if the price is below $55,000 on October 29. Thus, the "long butterfly" entreatment is a potential proceeds of 3.5 times larger than the maximum loss.

Overall, the merchandise yields a better take a chance-to-reward outcome than leveraged futures trading, peculiarly when considering the express downside. Information technology certainly looks similar an attractive bet for those expecting the ETF approving former over the next couple of months. The merely upfront fee required is 0.07 Bitcoin, which is plenty to cover the maximum loss.

The views and opinions expressed hither are solely those of the writer and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves hazard. Yous should conduct your own inquiry when making a conclusion.