Bitcoin Upside:

A Systematic Search

BTC is ~35% off its all-time high. We believe in the long-term thesis. The question isn't whether to get exposure — it's what's the most capital-efficient way to do it.

BTC Spot

$70,894

ATM IV (3m)

50.4%

Avg Funding Rate

2.7% ann.

1Y Return

−35.3%

What we did

We mapped 18 tradeable instruments correlated with BTC, catalogued 41 distinct strategies across TradFi and DeFi, and ran every one through 5 scenarios — from mild bull (+30%) to disaster (−50%) — modelling exact dollar payoffs on a $10,000 input.

Options priced with Black-Scholes using real Deribit and TradFi data. Funding rates from Hyperliquid, Binance, Bybit. DeFi rates from Aave V3. Everything is from a single snapshot on 2026-03-10.

Key finding: Leverage is historically cheap right now. Perp funding averages 2.7% annualised vs the bull-market norm of 8–15%. Options IV at ~50% is near fair value. The cost of being positioned for upside hasn't been this low in months.

Step 1: What can we actually trade?

18 instruments ranked by 90-day beta to BTC. Higher beta = more BTC leverage. Colour = correlation quality: how cleanly does it track BTC?

Miners look exciting but have 0.5 correlation — not clean BTC plays. HUT returned +261% while MARA lost −46% in the same period. Stock-picking risk dominates. For structured leverage, stick to Tier 1 and Tier 2 instruments.

ℹ️ What is Beta?

Beta measures how much an asset moves relative to BTC. A beta of 1.43 (like MSTR) means when BTC moves +10%, MSTR tends to move +14.3%. Beta >1 means amplified exposure. Beta is useful but only meaningful if correlation is also high — otherwise the moves are amplified but in unpredictable directions.

ℹ️ What is Correlation?

Correlation (ρ) measures how consistently two assets move together, from -1 to +1. A correlation of 0.94 (like IBIT) means IBIT's daily moves explain ~88% of BTC's variance. Correlation of 0.51 (like HUT) means the stock's moves are nearly as random as they are BTC-driven. For structured BTC upside trades, you want ρ > 0.85.

Step 2: What can we do with these assets?

41 strategies. Most are variations of 4 core ideas: buy spot, lever up, buy optionality, loop collateral.

Strategy	Category	Eff. Leverage	Carry Cost	Max Loss	Liquidity

The 4 core ideas: (1) Buy spot — the baseline, no decay, no expiry. (2) Lever up — perps, margin, DeFi loops; cheap carry but liquidation risk. (3) Buy optionality — calls give bounded loss + asymmetric upside; costs theta. (4) Loop collateral — DeFi's version of leverage; cheap but smart-contract risk.

Step 3: What does the maths say?

Every strategy. Every scenario. Dollar returns on $10,000 input.

ℹ️ Why do leveraged ETFs lose even when BTC ends higher?

Leveraged ETFs reset daily. If BTC drops 10% then rises 11.1% (back to start), a 2x ETF does -20% then +22.2% = net -2.2%. Over many such cycles, this "volatility drag" compounds. At BTC's 43.5% volatility, a 2x ETF bleeds ~19% annually just from the maths of daily rebalancing — even if BTC goes nowhere.

ℹ️ What does "drawdown then recovery" test?

The Drawdown→Recovery scenario (-30% trough, then recovery to +100% net) tests path dependency. Strategies with liquidation (perps at >3x, DeFi loops at >2.5x) get wiped out during the drawdown — even though BTC ends up doubling. Options survive because they can't be liquidated. This scenario alone eliminates most leveraged perp strategies as viable medium-term trades.

What we actually recommend

Four picks for four different situations.

Best for 1–3 months

Deribit 3m ATM Call

Strike $71K • Entry $6,792 (9.6% of spot) • 79-day runway

Highest absolute return for short-horizon bulls. +169% on a +30% BTC move in 3 months. ATM strike means it's immediately sensitive to BTC upside. No liquidation, no margin calls.

Risk: 100% premium loss if BTC flat/down by expiry. 9.6% of capital at risk upfront.

Best for 3–12 months

IBIT 1Y ATM Call (LEAPS)

Strike $39 • Entry $8.32 (21.3% of spot) • 310-day runway

The most capital-efficient bounded-loss BTC exposure for long horizons. Theta decay of only ~$0.015/day. +256% in Bull-3. Available at any US brokerage — no crypto exchange needed. Expiries out to Dec 2028.

Risk: 100% premium loss if BTC flat/down by expiry. 21% of capital at risk upfront.

Best asymmetric risk/reward

Deribit 1y 25% OTM Call

Strike $88K • Entry $7,727 (10.9% of spot) • 289-day runway

The optimal bounded-loss BTC bet for multi-month horizons. +96% in Bull-1, +187% in Bull-2, +349% in Bull-3. 289 days of runway means you survive temporary drawdowns that kill shorter-dated OTM calls.

Risk: 100% premium loss if BTC doesn't reach $88K by expiry. -54% in Drawdown-Recovery scenario.

The non-obvious trade

MSTR Calls vs IBIT Calls

MSTR 3m 25% OTM: +147% on +30% BTC • IBIT 3m 25% OTM: +72%

MSTR's 1.43x BTC beta means its calls activate earlier on BTC moves. The IV premium (80% vs 58%) is offset by the built-in leverage. Per dollar of premium, MSTR calls deliver ~2x IBIT returns in moderate bull scenarios.

Risk: MSTR-specific events (dilution, NAV premium compression) can decouple from BTC. Less clean.

Risk Profile Matrix

Profile	Strategy	Bull-3 Return	Disaster Loss	Key Tradeoff
Ultra-aggressive	Deribit 1y 50% OTM Call	+307%	-100%	Deep OTM but 289 days of runway
Aggressive + bounded	Deribit 1y 25% OTM Call	+349%	-100%	Best risk-adjusted options bet
Leveraged careful	Hyperliquid 3x	+301%	-100%	Survives -33% drawdown; cheapest carry
Conservative	IBIT LEAPS (1y ATM)	+256%	-100%	Bounded loss; 310-day runway
Minimal leverage	MSTR Equity	+143%	-72%	Free carry; 1.43x beta; no expiry
Baseline	Spot BTC	+100%	-50%	The benchmark

Data & Methodology

How we built this analysis.

Model

Black-Scholes for all options pricing (scipy.stats.norm). Risk-free rate: 4.5%.
Monte Carlo (1,000 paths, seed=42) for leveraged ETFs with daily rebalancing.
Exit IV assumptions: Bull scenarios 45% (mean reversion), Disaster 60% (vol spike), Drawdown-recovery 55%.
Options expiring before scenario endpoint use log-linear BTC interpolation at expiry date, then intrinsic payoff. Drawdown-recovery uses piecewise path (-30% at 6m, recovery to +100% at 12m).

Data Sources

Source	Data	Freshness
Deribit API	BTC options chain (924 instruments), IV surface, Greeks	2026-03-10 10:15 UTC
Hyperliquid API	Perp funding rate, OI, mark price	2026-03-10 10:15 UTC
Binance API	Perp funding rate, OI	2026-03-10 10:15 UTC
Bybit API	Perp funding rate, OI	2026-03-10 10:15 UTC
Aave V3 Subgraph	WBTC/USDC lending rates, LTV, utilisation	2026-03-10
yfinance	IBIT/MSTR/COIN/MARA equity + options data	2026-03-09 close
CoinGecko	BTC/ETH/WBTC price + correlation data	2026-03-10

Raw Data Files

data/phase3_payoffs.csv — 41 strategies × 5 scenarios = 205 rows
data/phase3_summary.json — structured results with rankings
data/phase2_deribit.json — full Deribit options chain
data/phase2_funding.json — perp funding rate snapshot
scripts/phase3_payoff_model.py — reproducible Python model