Bitcoin Halving Is Coming – How Are Options Traders Set?
As Bitcoin's halving event approaches, market participants, especially professional traders, are paying close attention to changes in the ecosystem. Historically, the speculation surrounding halftime events has created a lot of excitement, not particularly on the day of the half, but in the months that follow. This is due to the delayed impact of the reduced mineral production on the market.
Bitcoin miners, who are vital to this ecosystem, often choose not to check their holdings on a daily basis. Instead, they're especially stocked in the belief of an impending bull market—a sentiment supported by Bitcoin's 59% year-to-date appreciation in 2024. This collective market appreciation further strengthens the supply for sale, which can push prices higher. .
However, some analysts caution against overly simplistic expectations of post-halving price increases, pointing out that Bitcoin's price journey over the past 15 years has been shaped by many external factors. These include general economic trends, investor risk appetite, monetary policies and Bitcoin's relationship to the stock market. Given this complexity, relying only on historical patterns from the past half-century may be overly optimistic.
Neutral-to-energy call options dominate the June 28 expiration.
To prepare for the Bitcoin halving, professional traders are turning to alternative strategies. This approach allows for the use of positions with relatively small upfront deposits while sidestepping the outright loss risk prevalent in futures markets.
In particular, open interest on the June 28 Debate reached $4.5 billion, which showed a significant imbalance between call (buy) and put (sell) options, with bullish positions outnumbering weak positions by three times. Yet, this high-level view requires deeper analysis, as the cryptocurrency trading community tends to be optimistic.
There are call options up to $140,000 and $200,000 for the June 28 expiration, which seem overly ambitious. Excluding bets on prices above $90,000, actual call options open interest is approximately $2.72 billion. On the contrary, several options have been placed before the exit of Bitcoin above $50,000, which reduces their chances of profitability. There is currently $250 million in open interest for options at $57,000 or more.
Bitcoin's unexpected performance has been caught off guard by unexpected factors such as the successful approval of an exchange-traded fund in the US, inflation falling to 3%, or a global recession predicted on June 28. Therefore, bearish scenarios associated with a Bitcoin halving appear increasingly unlikely.
Will the halving have a “death spiral” effect on Bitcoin options?
Past predictions of a “death spiral” of declining rewards and declining participation in mining have been consistently disproved. The Bitcoin network fixes the problem every 2016 blocks (roughly every two weeks), ensuring stability even in the face of fluctuating hashrate levels.
Assuming a hypothetical scenario where the price of Bitcoin falls to $47,000 on June 28, a 32% discount from current levels, the open interest of the put options would be $422 million. Conversely, call options up to $46,000 for $670 million in exposure, underscoring the market's tilt toward a neutral-to-bullish bitcoin strategy, at least through the June 28 expiration.
This article does not contain investment advice or recommendations. Every investment and business activity involves risk, and readers should do their own research when making a decision.
