Options Traders’ Positioning Ahead of Bitcoin Halving

Bitcoin Futures

With the Bitcoin halving approaching, traders are closely monitoring market dynamics, particularly professional traders, to gauge sentiment. Historically, the anticipation surrounding halving events has typically led to bullish sentiment in the months following rather than on the exact halving date. This is due to the delayed impact of reduced mining output on the market.

Bitcoin miners tend to accumulate rather than liquidate holdings daily, especially anticipating a bullish market, bolstered by Bitcoin’s 59% appreciation year-to-date in 2024. This expectation of market appreciation further tightens supply, potentially driving prices higher.

However, analysts caution against simplistic post-halving price surge expectations, noting Bitcoin’s price trajectory is influenced by various factors, including economic trends, investor risk appetite, monetary policies, and correlations with the stock market. Relying solely on historical halving patterns may be overly optimistic.

Neutral-to-bullish call options dominate the June 28 expiry, with professional traders turning to options strategies to leverage positions with minimal upfront deposits, avoiding direct liquidation risk found in futures markets.

Open interest for options expiring on June 28 at Deribit has reached $4.5 billion, showcasing a significant call-to-put options imbalance, with bullish positions outweighing bearish ones threefold. However, this perspective warrants deeper analysis, considering the cryptocurrency community’s tendency towards optimism.

While there are call options targeting as high as $140,000 and $200,000 for the June 28 expiry, some appear overly ambitious. Realistic call options open interest is around $2.72 billion, excluding bets on prices exceeding $90,000. Conversely, put options placed before Bitcoin’s surge over $50,000 have diminished the likelihood of profitability, with open interest in puts at $57,000 or higher at a scant $250 million.

Bitcoin’s unexpected performance surge, attributed to factors like the approval of a spot exchange-traded fund in the U.S., reduced inflation to 3%, and absence of a predicted global economic recession by June 28, caught bears off guard. Consequently, bearish scenarios tied to the Bitcoin halving seem increasingly unlikely.

Speculations about a “death spiral” due to reduced block rewards and decreased miner participation have been consistently debunked. Bitcoin’s network adjusts its difficulty every 2016 block, ensuring stability amid fluctuating hash rate levels.

In a hypothetical scenario where Bitcoin’s price drops to $47,000 by June 28, a 32% decrease from current levels, put options open interest would be $422 million, while calling options up to $46,000 account for a $670 million exposure, highlighting a market inclination towards neutral-to-bullish strategies for the Bitcoin halving, at least by the June 28 expiry.

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