As the Bitcoin halving event approaches, market participants, particularly professional traders, are closely monitoring the changes within 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 reduced mining output takes time to impact the market.
Bitcoin miners, who play a crucial role in this ecosystem, often choose not to sell their holdings daily. Instead, they accumulate them, especially when they believe that a bullish market is imminent. This sentiment is supported by Bitcoin’s impressive 59% appreciation year-to-date in 2024. This collective expectation of market appreciation further reduces the supply available for sale, potentially driving prices higher.
However, some analysts caution against having overly simplistic expectations of price surges after the halving. 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 approach allows them to leverage their positions with a relatively small upfront deposit, avoiding the risk of liquidation that is prevalent in futures markets.
Notably, the open interest for options expiring on June 28 at Deribit has reached $4.5 billion. There is a significant imbalance between bullish (buy) and bearish (sell) options, with bullish positions outnumbering bearish ones by threefold. However, this high-level view requires a deeper analysis, as the cryptocurrency trading community tends to lean towards optimism.
There are call options with targets 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, making them less likely to be profitable. Currently, there is only a small open interest of $250 million for put options with a strike price of $57,000 or higher.
Bitcoin’s unexpected surge caught bearish traders by surprise. Factors like the successful approval of a spot exchange-traded fund in the U.S., a drop in inflation to 3%, and the absence of a predicted global economic recession by June 28 contributed to this surge. As a result, bearish scenarios related to the Bitcoin halving are becoming increasingly unlikely.
Speculations about a “death spiral” triggered by reduced block rewards and a subsequent drop in miner participation have been consistently debunked. Bitcoin’s network adjusts its difficulty every 2016 blocks, ensuring stability even when the hashrate levels fluctuate.
In a hypothetical scenario where Bitcoin’s price drops to $47,000 by June 28, the open interest for put options would be $422 million. In contrast, call options up to $46,000 account for a $670 million exposure. This highlights 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.