Bitcoin has been in a nearly nine-month downturn, causing even long-term holders to feel uneasy. Key technical indicators, including exponential moving averages and the Directional Movement Index, indicate a bearish trend. Historically, Bitcoin has experienced severe drawdowns, with four of its worst declines exceeding 80%. If a similar scenario unfolds, Bitcoin could drop to around $22,000.
This downturn is not isolated; other inflation hedges and commodities are also facing declines, with precious metals like gold and silver falling below long-term moving averages. While outright shorting Bitcoin or related equities carries significant risk, a more strategic approach has been suggested.
One option is to use a bearish position against MicroStrategy (MSTR) to collect premiums through out-of-the-money call spreads. For instance, a bear call spread trade on MSTR involves selling a call option at $87 and buying another at $90, allowing for a net credit of $1.50 with defined risk.
This strategy limits potential losses while still allowing investors to profit if the stock remains below the short strike. As the crypto market continues to fluctuate, employing defined-risk strategies can help investors navigate the uncertainty while generating income