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⚡El Salvador's Bitcoin Journey Unveiled🇸🇻

Croxroad

08 Dec 2023 — 5 min read

☕️ GM Dear Plebs!

Here is Crox Road, your daily dose of orange pill that will turn you into a Bitcoin Maxi.

The menu for today:

🇸🇻 El Salvador's Risky Gamble Examined

In a nutshell, El Salvador's president, Nayib Bukele, is celebrating a successful turn for the Bitcoin reserve he purchased with public funds as the cryptocurrency's value rises. Despite spending over $120 million on Bitcoin since 2021, recent market trends have allowed his 2,764 coins to surpass their initial value, potentially yielding a profit of about $3.7 million if sold at the current price.

Bukele, who recently stepped down as president to campaign for a controversial second term, urged critics to retract their statements, highlighting the positive outcome of his Bitcoin investment. However, economists caution against premature celebration, emphasising that the $120 million expenditure on Bitcoin is just a fraction of the total funds allocated to promote cryptocurrency adoption in El Salvador.

Critics argue that the overall economic cost of the Bitcoin project, including investments in the Chivo Wallet application, non-functional ATMs, and propaganda, outweighs the apparent success of Bukele's Bitcoin holdings. Some believe the push for Bitcoin adoption has not yielded the desired results, with citizens relying more on the stability of the US dollar in cash form.

Despite Bukele's optimism and the recent increase in Bitcoin's value, economists express concerns about transparency issues, as there is no official tracking of Bitcoin spending or the status of the $100 million reserves. The lack of disclosure raises questions about the government's control over the cryptocurrency.

While Bitcoin enthusiasts celebrate the positive turn in El Salvador's Bitcoin strategy, critics argue that the social cost, particularly in a context of poverty and food insecurity, should have prompted the government to allocate public resources differently. The ongoing debate highlights the complexities and challenges associated with El Salvador's ambitious venture into Bitcoin adoption.

🪆 Will Bitcoin Hit $50K?

The current state of Bitcoin's options market is quite interesting. The open interest for Bitcoin options has reached an all-time high of $20.5 billion on December 7, indicating a significant involvement of institutional investors in the cryptocurrency space. Unlike futures contracts, Bitcoin options have preset expiration prices, providing insights into traders' expectations and market sentiment.

The leading player in the Bitcoin options market is Deribit, holding an impressive 90% market share with $2.05 billion open interest for options expiring on January 26. However, it's important to note that a substantial portion of these bets may lose value as the expiration date approaches.

Despite this, the potential approval of a spot exchange-traded fund (ETF) has rekindled bullish bets that were previously on the sidelines. The cost of a Bitcoin call option, specifically the $54,000 call expiring on January 26, is currently trading at 0.02 BTC, equivalent to $880. This option requires a 25% increase in Bitcoin's value in the next 49 days for the buyer to profit. Sellers can hedge their positions using BTC futures, mitigating some of the perceived risks.

Analysts highlight the significance of the $250 million open interest from the $50,000 call options on Deribit. If regulatory authorities approve the spot ETF plans, the value of these options could experience considerable growth. However, it's uncertain whether buyers intend to use these options for bullish strategies.

There is relatively modest demand for call options in the $70,000 to $80,000 range, suggesting a lack of enthusiasm among bulls. On the other hand, put options, which indicate a cautious approach, show that 97% of bets are placed at $42,000 or lower for the January expiry. While the $568 million open interest in put options might face challenges, selling put options can be a way for traders to gain positive exposure to Bitcoin above specific price levels.

The article emphasises that Bitcoin put options should not be dismissed yet. The open interest in January 26 call options surpasses that of put options on Deribit by a factor of 2.6, indicating a greater demand for neutral-to-bullish strategies. However, it's crucial to remember that the expiration price is determined solely at 8:00 UTC on January 26, making it premature to make substantial predictions at this stage. For Bitcoin bears, the ideal scenario would involve the rejection of the ETF proposal, although the regulatory landscape remains uncertain, especially with ongoing trials involving major players like Binance and its founder, Changzeng Zhao.

🍥 Swing Trading

Swing traders are like the middle-ground players in the cryptocurrency market. They're not in it for the super long term, nor are they making lightning-fast decisions like day traders. Instead, they ride the ups and downs of the market for about a week or a month.

Now, swing traders aren't just relying on luck. They've got game plans, using both fundamental (looking at the big picture of a crypto, like its overall health) and technical (analysing charts and patterns) indicators. This gives them enough time to keep an eye on a crypto's price and decide when to buy or sell.

But here's the catch – swing trading can get a bit hectic. It's not really a beginner-friendly strategy because it often requires quick decision-making. Plus, even if a trader isn't making moves every day, they still need to stay tuned to the market regularly. So, it's a bit complex and eats up a fair bit of time.

Now, the cool part is that there are tools out there, like crypto bots and signals, that can make swing trading a bit easier. These are like little automated helpers. For example, trading robots can scan the market and automatically buy or sell assets based on specific rules. It's like having a smart assistant handling things for you, so you don't have to be glued to the screen all the time.