The Bitcoin halving is coming — How are options traders positioned?

As the Bitcoin halving approaches, professional traders and investors are closely monitoring changes within the cryptocurrency’s ecosystem. Historically, excitement builds up around these events, with a bullish trend emerging in the months following rather than right on the day of the halving itself. This is due to the gradual effect of decreased mining rewards on the market.

Bitcoins miners, who play a crucial role in this system, frequently decide against selling their Bitcoins every day. Instead, they amass them, fueled by the belief that a bullish market is on the horizon – an idea reinforced by Bitcoin’s impressive 59% price increase in 2024 so far. The shared anticipation of a price surge among miners can further reduce the amount of Bitcoins up for sale, possibly causing prices to rise even more.

While some experts warn against assuming significant price increases after a Bitcoin halving, they note that Bitcoin’s price history over the past 15 years has been influenced by numerous external factors. These include economic conditions, investor sentiment, monetary policies, and Bitcoin’s connection to the stock market. Due to this intricacy, solely relying on past patterns from previous halvings could be overly hopeful.

Neutral-to-bullish call options dominate the June 28 expiry

As the Bitcoin halving approaches, expert traders are progressively adopting options trading techniques. Through this method, they can amplify their investments using a minimal initial investment, avoiding the significant risk of margin calls that come with futures contracts.

Significantly, the total value of open option contracts expiring on June 28 at Deribit amounts to $4.5 billion. This figure underscores a substantial discrepancy between the number of call (buy) and put (sell) options. Bullish bets, representing three times more positions than bearish ones, are currently dominating the scene. However, it’s important to note that this broad perspective should be further scrutinized, as the cryptocurrency market often exhibits a generally optimistic outlook.

The Bitcoin halving is coming — How are options traders positioned?

The prices for some call options for Bitcoin‘s June 28 expiry reach as high as $140,000 and $200,000. However, these seem excessively optimistic. Disregarding wagers on prices above $90,000, the total value of open call options is approximately $2.72 billion. On the other hand, prior to Bitcoin‘s surge beyond $50,000, several put options were purchased. Now, the amount of open interest for these put options, priced at $57,000 or higher, stands at a relatively small $250 million.

Bitcoins unexpected rise took bears off guard. Factors like the US approval of a Bitcoin ETF and decreased inflation to 3% might have contributed. The absence of a predicted global economic downturn by late June was another surprise. As a result, bearish predictions regarding Bitcoins halving seem less likely.

Will the halving have a “death spiral” impact on Bitcoin options?

Previous concerns about a potential “death spiral” caused by decreasing block rewards leading to less miner involvement have been disproven multiple times. Bitcoin’s network automatically adjusts its difficulty every 2016 blocks, or roughly every two weeks, ensuring stability despite varying hashrate levels.

If Bitcoin’s price were to fall to $47,000 by June 28, representing a 32% decrease from present prices, the open interest for put options would amount to $422 million. On the other hand, call options with a strike price up to $46,000 indicate an exposure of $670 million. This demonstrates that investors have leaned towards neutral-to-bullish strategies for Bitcoin’s halving by the June 28 expiration date.

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2024-04-09 20:26