The Trade:
Buy call option on BTC or MSTR with the end of year expiration.
*Potential gains: 100-150x
*Odds: for you to decide, but IMO it's at least 10-20% which makes the expected return of 16 to 28x
Why:
I believe the BTC price to follow a predictable price cycle, driven by the halving events (every 4 years) which the halving of block reward cause a supply shortage of BTC and drive the BTC price to a new high.
In the first (Nov 2012) and second(July 2016) halving, the price peaked around 1 year and 3-4 months afterwards. We had the 3rd BTC halving event in May 2020, which means we may see a peak as early as the end of Sep 2021, but I’m willing to give it time until the end of the year which makes it 1 year and 7 months after the most recent halving.
How high can BTC go? I like the stock to flow cross-asset model (S2FX) by PlanB, but many people think the model is already invalidated. The S2FX model attempts to predict the price of BTC based on the stock to flow ratio of bitcoin. Stock is the existing supply of the bitcoins; flow is the current rate of new bitcoin mined in a year. Hence the stock to flow ratio is how many years will the existing stock size double.
Here is the link to the model, PlanB explains this way better: google "PlanB S2FX"
According to the S2FX model, we will hit a medium price of 288K dollars per coin during the current halving epoch. As of today, the BTC price is around 32k dollar per coin, which present a possible 9x gain if it will reach 288k.
We can take on some risks to increase the gains and it's a bet with a beautiful outsized return, mad gains if you will.
How:
Call Options
As call options have limited risk (lose all your option premium), but unlimited upside, this is the perfect tool to bet on BTC's potential explosive price increase from 32k to 288k by end of this year.
*E.g. BTC call option with a strike price of 64k dollars and an expiration of 31 2021 is trading around 1.5k dollars per contract (1 BTC per contact).
Potential profit if S2FX is right: 288k-64k = 224k (149x)
Alternatively, this can be done with MSTR stock, as the company is currently holding 105k of BTC and I believe it to be trustworthy in holding on to the BTC. We can use MSTR stock price as a BTC proxy.
According to my model, if MSTR maintains the current BTC holding by end of the year with 288k dollars per BTC, MSTR stock price could easily go over 3400 dollars per share, from 550 dollars as of writing.
*E.g. MSTR call option with a strike price of 1400 dollars and an expiration of 21 Jan 2022 is trading around 1.6k per contract (100 shares per contract).
Potential profit if S2FX is right: (3400-1400)*100=200k (125x)
Position sizing/risk management
How much of your portfolio should be allocated to this trade is highly individual but think about the following:
Because of the huge potential gains of this trade, a 1% allocation can more than double your entire portfolio, even at 0.5% allocation can your portfolio by over 50%.
I’m committing 5% of my portfolio to this trade.
Stay invested & Best of Luck
*no financial advice*
Buy call option on BTC or MSTR with the end of year expiration.
*Potential gains: 100-150x
*Odds: for you to decide, but IMO it's at least 10-20% which makes the expected return of 16 to 28x
Why:
I believe the BTC price to follow a predictable price cycle, driven by the halving events (every 4 years) which the halving of block reward cause a supply shortage of BTC and drive the BTC price to a new high.
In the first (Nov 2012) and second(July 2016) halving, the price peaked around 1 year and 3-4 months afterwards. We had the 3rd BTC halving event in May 2020, which means we may see a peak as early as the end of Sep 2021, but I’m willing to give it time until the end of the year which makes it 1 year and 7 months after the most recent halving.
How high can BTC go? I like the stock to flow cross-asset model (S2FX) by PlanB, but many people think the model is already invalidated. The S2FX model attempts to predict the price of BTC based on the stock to flow ratio of bitcoin. Stock is the existing supply of the bitcoins; flow is the current rate of new bitcoin mined in a year. Hence the stock to flow ratio is how many years will the existing stock size double.
Here is the link to the model, PlanB explains this way better: google "PlanB S2FX"
According to the S2FX model, we will hit a medium price of 288K dollars per coin during the current halving epoch. As of today, the BTC price is around 32k dollar per coin, which present a possible 9x gain if it will reach 288k.
We can take on some risks to increase the gains and it's a bet with a beautiful outsized return, mad gains if you will.
How:
Call Options
As call options have limited risk (lose all your option premium), but unlimited upside, this is the perfect tool to bet on BTC's potential explosive price increase from 32k to 288k by end of this year.
*E.g. BTC call option with a strike price of 64k dollars and an expiration of 31 2021 is trading around 1.5k dollars per contract (1 BTC per contact).
Potential profit if S2FX is right: 288k-64k = 224k (149x)
Alternatively, this can be done with MSTR stock, as the company is currently holding 105k of BTC and I believe it to be trustworthy in holding on to the BTC. We can use MSTR stock price as a BTC proxy.
According to my model, if MSTR maintains the current BTC holding by end of the year with 288k dollars per BTC, MSTR stock price could easily go over 3400 dollars per share, from 550 dollars as of writing.
*E.g. MSTR call option with a strike price of 1400 dollars and an expiration of 21 Jan 2022 is trading around 1.6k per contract (100 shares per contract).
Potential profit if S2FX is right: (3400-1400)*100=200k (125x)
Position sizing/risk management
How much of your portfolio should be allocated to this trade is highly individual but think about the following:
Because of the huge potential gains of this trade, a 1% allocation can more than double your entire portfolio, even at 0.5% allocation can your portfolio by over 50%.
I’m committing 5% of my portfolio to this trade.
Stay invested & Best of Luck
*no financial advice*