Bitcoin Profits: Timing Trump's Conference

Traders should wait until after former President Donald Trump's speech at the Bitcoin Conference on Saturday to cash out on their bitcoin profits. Some expect Trump to announce plans to make bitcoin a strategic reserve asset if he gets elected in November, which could result in a "parabolic move" for bitcoin.

Traders could be forgiven for wanting to cash in after bitcoin's quick rise of more than 20% to the current $67,000 from its early July lows, but another possibly major positive catalyst might be just days away, said 10x Research founder Markus Thielen. “Taking profit, or even shorting bitcoin ahead of Trump’s Nashville speech, could turn out to be an expensive exercise,” wrote Thielen in his Monday newsletter.

Former President and current Republican nominee for this year’s presidential election Donald Trump is scheduled to speak at the Nashville Bitcoin Conference on Saturday and speculations are mounting that he will announce a plan to make bitcoin a strategic reserve asset. Thielen further noted that bitcoin is trading close to the previous bull market's all-time high ($69,000), often touted by technicians as a "line in the sand" over which a possible "parabolic move" might occur if prices could successfully hold above that level.

Thielen is of the opinion that Joe Biden's exit from the presidential race has essentially sealed the deal for a Trump victory in November. Per Thielen, this likely means an early exit for U.S. Securities and Exchange Commission Chair Gary Gensler, who has earned a reputation as a foe of the crypto industry. While Gensler's term doesn't officially end until June 2026, Thielen expects him to resign around the time of a Trump inauguration in early 2025.

The former president is scheduled to speak in Nashville on Saturday at 3pm Eastern Time. Donald Trump's impending appearance at the Nashville Bitcoin conference has traders preparing for fat-tails – extreme or unusual price movements in the leading cryptocurrency. Activity in the options market listed on Deribit and tracked by Amberdata shows a noticeable increase in the "butterfly index," which measures the volatility of the out-of-the-money (OTM) 25-delta (Δ25) call and put options listed at a distance from the going market price of bitcoin relative to at-the-money (ATM) options closer to the spot price. The spike in the index indicates expectations for more extreme market movements.

"This week we’re going to hear Trump speak at the Nashville Bitcoin conference. As long as Trump remains a front-runner, this is a potential catalyst for 'something to happen' this week. The derivative markets seem to agree, and we’re seeing pricing support the 'something is about to happen' narrative." Greg Magadini, director of derivatives at Amberdata, said in an email.

"Something we don’t often talk about, but merits a shoutout this week, is the spike higher in 25-delta wings versus ATM volatility. This type of activity in the options market reflects the anticipation for higher return distribution Kurtosis or fat tails," Magadini added. Options are derivative contracts that protect the buyer from bullish or bearish price movements. A call offers protection from bullish moves, while a put is insurance against price slides. Calls at strikes above BTC's going market rate are said to be OTM, while puts below the going rate are said to be OTM. Traders typically buy OTM options when preparing for unexpected market movements, pushing the butterfly index higher.

Hence, trading desks typically use the term "butterfly" to indicate the extent of change in the volatility smile or the volatility profile of options at various strike levels and expiration dates. When butterflies become costly, it suggests that the volatility smile has steepened, a sign of the potential for extreme or unexpected events to affect market outcomes. Trump is scheduled to speak at the Nashville conference on July 27, despite the recent assassination attempt that boosted his chances of winning the Nov. 4 Presidential elections. The grapevine is that Trump might announce a more significant role for BTC in the U.S. financial system.

"Speculation is high that he will announce bitcoin as a strategic reserve asset, which could trigger a parabolic rise in bitcoin's price," Markus Thielen, founder of 10x Research, said in Monday's edition of the newsletter. "Taking profit, or even shorting bitcoin ahead of Trump’s Nashville speech, could turn out to be an expensive exercise." Additional factors, such as the expected debut of spot ether ETFs in the U.S., also explain the rise in the butterfly index.

"Traders and market makers are worried about tail risks from the FOMC on July 31 and the upcoming spot ETFs, which has pushed up the pricing for BTC's tail risks [butterfly index]," Griffin Ardern, head of options trading and research at crypto financial platform BloFin, told CoinDesk. In a remarkable twist, the crypto world is buzzing with speculation following former President Donald Trump's keynote address at the Bitcoin Conference in Nashville. Trump, once dismissive of bitcoin and cryptocurrencies, now appears to have fully embraced the industry. This shift was highlighted in a recent discussion between Scott Melker, host of The Wolf of All Streets podcast, and George Tung of CryptosRus.

The excitement centers around a tweet from Dennis Porter suggesting that Trump might announce bitcoin as a strategic reserve asset. Melker opened the discussion by asking Tung about the plausibility of such an announcement and its potential impact. "I do think there's a chance that Trump might actually say something like that," Tung responded. He explained that while most Americans might not understand the implications, recognizing bitcoin as a strategic reserve could mark the first official acknowledgment of its importance by the U.S. government. Such a move could spark global attention and prompt other nations to follow suit, especially those like Germany that have recently divested significant bitcoin holdings.

Melker emphasized the potential for a historic shift. He noted that the U.S. government already holds a substantial amount of bitcoin from past confiscations, such as from Silk Road. Transferring these holdings to the treasury could effectively position bitcoin as a strategic reserve asset. If Trump makes this announcement, it would not only make international headlines but also compel other central banks to reconsider their stance on bitcoin. The conversation also touched on broader implications for the global economy. Tung envisioned a scenario where countries might begin hoarding bitcoin alongside gold, driving its price to unprecedented levels due to its inherent scarcity. "The scarcity factor of bitcoin is going to drive the prices up to only God knows how much," he said.

Melker agreed, stating that such developments could surpass even the most optimistic predictions for bitcoin's future value. He added that regardless of the specifics, Trump is expected to make a significant announcement at the conference, potentially reshaping the crypto landscape. Tung further speculated on the potential political ramifications. With rumors of SEC Chair Gary Gensler's resignation and the possibility of Trump appointing a pro-crypto SEC chair, the regulatory environment could become much more favorable for cryptocurrencies. Additionally, Tung mentioned that Trump might consider appointing prominent pro-bitcoin figures like Larry Fink of BlackRock as future Treasury Secretary, further cementing the administration's support for the crypto industry.

The discussion concluded with Melker reflecting on the rapid changes in the political and financial landscape. He noted that bitcoin's emergence as a campaign issue for the 2024 presidential election was unexpected but indicative of the growing importance of cryptocurrencies. Read more on Rapid Innovation Blogs.