As the Bitcoin halving event approaches, market participants, particularly professional traders, are closely monitoring the changes in the ecosystem. In the past, the anticipation surrounding halving events has created a bullish sentiment, usually in the months following the halving rather than on the exact date. This is because the impact of reduced mining output on the market takes time to materialize.
Bitcoin miners, who play a crucial role in this ecosystem, often choose to accumulate their holdings instead of selling them daily. They do this in anticipation of a bullish market, a sentiment that is supported by Bitcoin’s 59% increase in value so far this year. This collective expectation of market appreciation further reduces the available supply for sale, potentially driving prices higher.
However, some analysts caution against having overly simplistic expectations of post-halving price surges. They point out that Bitcoin’s price trajectory over the past 15 years has been influenced by various external factors, such as overall economic trends, investor risk appetite, monetary policies, and its correlation with the stock market. Therefore, relying solely on historical patterns from previous halvings may be overly optimistic.
In preparation for the Bitcoin halving, professional traders are increasingly turning to options strategies. This allows them to leverage their positions with a relatively small upfront deposit, avoiding the direct risk of liquidation that exists in futures markets.
Notably, the open interest for options expiring on June 28 at Deribit, a cryptocurrency exchange, has reached $4.5 billion. This indicates a significant imbalance between bullish (call) and bearish (put) options, with bullish positions outnumbering bearish ones by threefold. However, it’s important to delve deeper into this data, as the cryptocurrency trading community tends to lean towards optimism.
There are call options with strike prices as high as $140,000 and $200,000 for the June 28 expiry, which may seem overly ambitious. If we exclude bets on prices above $90,000, the realistic open interest for call options is approximately $2.72 billion. On the other hand, several put options were placed before Bitcoin’s surge above $50,000, reducing their potential profitability. Currently, there is minimal open interest in put options with strike prices at $57,000 or higher.
Bitcoin’s unexpected surge caught bearish traders off guard, whether due to unforeseen factors like the successful approval of a spot exchange-traded fund in the U.S., a decrease in inflation to 3%, or the absence of a predicted global economic recession by June 28. As a result, bearish scenarios linked to the Bitcoin halving seem increasingly unlikely.
Speculations about a “death spiral” caused by reduced block rewards and a subsequent decrease in miner participation have been consistently debunked in the past. Bitcoin’s network adjusts its difficulty regularly to ensure stability, even if the hashrate fluctuates.
In a hypothetical scenario where Bitcoin’s price drops to $47,000 by June 28, a 32% decrease from current levels, the open interest for put options would be $422 million. In contrast, call options up to $46,000 account for a $670 million exposure, indicating a market preference for neutral-to-bullish strategies for the Bitcoin halving, at least by the June 28 expiry.
Please note that this article does not provide investment advice or recommendations. Investing and trading involve risks, and readers should conduct their own research before making any decisions.