Crypto Market Closes in on Worst January Performance Since 2015

Key Takeaways

  • The crypto market is approaching its worst January close since 2015 after dropping 22.7% this month.
  • The market is over $1 trillion from its peak.
  • Though Bitcoin, Ethereum, and other assets are suffering, the NFT market is still booming.

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The crypto market has shed $500 million of its value this month. 

Crypto Market Heads for January Close 

It looks like the crypto bull market could be over—at least for fungible assets. 

Source: TradingView

It’s been a rough few weeks for Bitcoin, Ethereum, and other digital assets after the market has shed over $1 trillion in value since its November peak. Now, the market is approaching its worst January close since 2015. 

According to data from TradingView, the global cryptocurrency market cap has lost $500 million this month, tumbling from around $2.2 trillion to $1.7 trillion today. Though severe, the 22.7% drop is not the only weak monthly performance crypto enthusiasts have endured over the last few months. In December, the market tanked 15.5%. The market also suffered a brutal crash last May amid fears of China’s Bitcoin mining ban and an overexhausted environment, closing the month 24.1% in the red. 

While the May crash was the most severe the market has seen for some time, this month’s performance looks set to go down as crypto’s worst January on record. The two years prior to this, the market has kicked off the year with a green month. In January 2019, the market shed around 9.4% of its value. January 2018 closed 15.3% in the red, kicking off an extended bear trend that saw the market tank 80% in the space of a year. By the end of 2018, Ethereum had bled 94% from a high of $1,430 to $80. Many other assets fell over 95% and never recovered to new highs. 

At press time, Bitcoin is 44.5% off its $69,000 all-time high. Ethereum is 45.7% off its peak, and many of the winners of 2021—including Solana and Axie Infinity—are over 60% short of their highs. The dog-themed meme coins Dogecoin and Shiba Inu are respectively down about 80% and 75%. 

While major assets have been hard hit of late thanks in part to Omicron fears and the Federal Reserve’s threat of interest rate hikes, some corners of crypto are booming. NFTs have fared particularly well in recent weeks, likely because most traders price their digital collectibles in Ethereum. According to data from Dune Analytics, OpenSea has seen a record $4.8 billion in volume this month as demand for hot collections like Bored Ape Yacht Club and Cool Cats soars.  

Disclosure: At the time of writing, the author of this feature owned ETH and several other cryptocurrencies. 

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This bullish Bitcoin options strategy targets $50K without risk of liquidation

Long-dated Bitcoin options and bulls still make waves with their ultra bullish bets, but even they must admit that the possibility of (BTC) trading above $60,000 in the next couple of months is dim. 

Many traders have added leveraged-long positions via futures contracts to chase after the elusive all-time high, but this seems like an unrealistic outcome.

According to Willy Woo, a popular on-chain analyst, exchange outflows and accumulation from BTC miners and whales suggest that Bitcoin price will reach the $50,000 to $65,000 range in the coming sessions.

Even Gary Gensler, the Chair of the United States Securities and Exchange Commission, believes that cryptocurrencies won’t go away and will likely play a big role in the future of finance. Therefore, being moderately bullish for the next couple of months will likely yield positive results.

For bullish traders who think Bitcoin price will break to the upside but are unwilling to face the liquidation risks imposed by futures contracts, the “long condor with call options” strategy might yield more optimal results.

Options are a safer bet for avoiding liquidations

Options markets provide more flexibility to develop custom strategies and there are two instruments available. The call option gives the buyer upside price protection, and the protective put option does the opposite. Traders can also sell the derivatives to create unlimited negative exposure, similar to a futures contract.

Bitcoin options strategy returns. Source: Deribit Position Builder

This long condor strategy has been set for the Sep. 21 expiry and uses a slightly bullish range. The same basic structure can also be applied for bearish expectations, but we’ll assume most traders are looking for upside.

Bitcoin was trading at $37,830 when the pricing took place, but a similar result can be achieved starting from any price level.

The first trade requires buying 1.20 BTC worth of $42,000 call options to create a positive exposure above this price level. Then, to limit gains above $46,000, the trader needs to sell 1.1 BTC contracts of the $46,000 call.

To complete the strategy, the trader needs to sell 1.3 BTC contracts of the $56,000 call, limiting the gains above this price level. Then a $60,000 upside protection call for 1.22 BTC is needed to limit the losses if Bitcoin unexpectedly skyrockets.

Related: Bitcoin price dips below $38K, with bullish traders eyeing a new higher low next

In this situation, the gain far outweighs the loss

The strategy might sound complicated to execute, but the margin required is only 0.0265 BTC, which is also the max loss. The potential net profit happens if Bitcoin trades between $42,950 (up 13.5%) and $59,450 (up 57%).

Traders should remember that it is also possible to close the position ahead of the Sep. 21 expiry if there’s enough liquidity. The max gain occurs between $46,000 and $56,000 at 0.0775BTC, almost three times higher than the potential loss.

With over 50 days until the expiry date, this strategy gives the holder peace of mind because there is no liquidation risk like futures trading.

Another positive is that most derivatives exchanges accept orders as low as 0.10 BTC contracts, meaning a trader could build the same strategy using a much smaller amount.

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.