One of the best ways to participate in the crypto market next year is by consistently offering insurance against a bitcoin (BTC) price rally, according to crypto services provider Matrxiport.
The strategy, known as systematic call option overwriting, often outperforms a buy-and-hold approach in a market without a strong bullish direction, and Matrixport said it doesn't foresee a raging bitcoin bull market in 2023.
"'The 'weekly systematic call overwriting strategy' could be a winner as the industry likely moves through several months of uncertainty," Markus Thielen, Matrixport's head of research at strategy, said in a note to clients on Friday.
Overwriting involves regularly selling weekly expiry call options while owning the underlying asset. In effect it means offering insurance against price increases to the counterparty, because they have the right – but not the obligation – to buy the asset at the predetermined price on or before the expiry date. A call buyer is implicitly bullish on the market and compensates the seller for offering insurance by paying a premium.
(By Omkar Godbole)