Crypto Analyst Benjamin Cowen Says Bitcoin Won’t Have Parabolic 2021, Predicts Bull Market Will Extend to 2022

Popular crypto strategist and trader Benjamin Cowen says he believes Bitcoin (BTC) will likely not end 2021 with a bang.

In a new strategy session, Cowen tells his 597,000 YouTube subscribers that he thinks Bitcoin is in a massive reaccumulation range. Looking at the big picture, the analyst says Bitcoin has been trading within a wide range between $28,000 and $65,000 for the entire year so far.

“This is where we started, right around $28,000, $29,000… That was the beginning of 2021. And then so far, what have we done? Not a whole lot, right? Could we finally break out of it as we get into the end of the year? Yeah, it’s certainly possible. But look: I don’t think 2021 for Bitcoin is going to go down as a parabolic rally year in the sense that we spent most of the year going sideways.”  

While the distance between the range low and the range high might look significant, Cowen argues that Bitcoin holders will probably not get excited over gains of a little more than 2x.

“You take a look at what’s happened in 2021 for Bitcoin, a whole lot of nothing. We’ve more or less just been in this range of approximately 130%. I guarantee you most Bitcoiners don’t get out of bed for a 130%.” 

The trader says he calls 2021 “The Great Accumulation Year” for Bitcoin and adds that he expects BTC to stretch out its bull cycle into 2022.

“I think there’s a lot of recency bias today because we’ve come up back to the top of the range. Just like there was a lot of euphoria over here (Jan 2021 to March 2021). We could certainly break out here… But I still think, based on all the data that I look at, that the cycle should lengthen into 2022 at the very least. And that when I look at this (2021 range), I just say, ‘You know what 2021, for the most part, has been a long reaccumulation year.’”

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How cautiously bullish Bitcoin traders use options to maintain BTC exposure

Bitcoin (BTC) traders appear undecided on the next step and this is reflected in the price oscillating between $58,400 and $63,400 over the last 14 days. There are some bearish signals coming from the United States regulatory front, but at the same time,the Bitcoin exchange-traded funds (ETF) surpassing $1.2 billion in assets under management has also boosted investors’ expectations.

Bitcoin price in USD at Coinbase. Source: TradingView

A Nov. 5 CryptoQuant report confirmed that whales have accounted for most selling pressure in recent days. The on-chain monitoring resource focused its attention on the “exchange whale ratio” — the percentage of inflows coming from the largest wallets — and showed a clear increase from the middle of October until today.

Moreover, on Nov. 1, the U.S. Treasury Department urged Congress to act promptly to enact legislation to ensure that payment stablecoin issuers are regulated similarly to the U.S. banks. In practice, the report recommends that stablecoins should be issued only through “entities that are insured depository institutions.”

Still, institutional money managers managed to add $2 billion worth of Bitcoin through mutual funds in October. According to the Oct. 31 CoinShares flow report, ProShares Bitcoin Strategy ETF, which launched officially on Oct. 19, accounted for $1.2 billion in inflow.

Options allow traders to bet on  bullish and bearish moves

Contrary to popular belief, derivatives markets were not designed for gambling and excessive leverage. Derivatives trading has been around for more than five decades and institutional traders have been shifting their attention — and volume — to cryptocurrency over the past couple of years.

The subject became the centerpiece on July 7, as Bloomberg reported a $4.8 million options trading gain from the husband of Nancy Pelosi, the Speaker of the U.S. House of Representatives. In a July 2 financial disclosure, Paul Pelosi reported exercising call options to acquire 4,000 shares of Alphabet, Google’s parent company, at a strike price of $1,200.

Options trading presents different opportunities for investors seeking to profit from increased volatility, maximizing gains if the price remains in a specific range, or obtaining protection from sharp price drops. Those complex trades involving more than one instrument are known as options structures.

How to limit losses and keep unlimited gains

For those unfamiliar with options trading, Cointelegraph previously published an article detailing all of the ins and outs of options, including the benefits over futures contracts trading.

To hedge losses from unexpected price swings, one can use the “risk reversal” options strategy. The investor benefits from being long on the call options, but pays for those by selling the put. Basically, this setup eliminates the risk of the stock trading sideways but does come with substantial risk if the asset trades down.

Profit and loss estimate. Source: Deribit Position Builder

The above trade focuses exclusively on Dec. 31 options, but investors’ will find similar patterns using different maturities. First, one needs to buy protection from a downside move by buying 2.45 BTC puts (sell) $44,000 options contracts.

Then, the trader will sell 2 BTC put (sell) $54,000 options contracts to net the returns above this level. Finally, buying 2.20 call (buy) $85,000 options contracts for positive price exposure.

That options structure results in no gain or loss between $54,000 (down by 11.5%) and $85,000 (up by 39%). In doing this, the investor is betting that Bitcoin price on Dec. 31 at 8:00 am UTC will be above that range while gaining exposure to unlimited gains and a maximum BTC 0.455 loss.

There is no cost associated with this options structure, but the exchange will require a margin deposit to cover potential losses. Keep in mind that the minimum options trade on most derivative exchanges is 0.10 BTC contract.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.