As the Bitcoin halving event approaches, market participants, particularly professional traders, are closely monitoring the changes in the ecosystem. Throughout history, the anticipation surrounding halving events has created a bullish sentiment, typically seen in the months following the halving rather than on the exact date. This is due to the delayed impact of reduced mining output on the market.
Bitcoin miners, who play a crucial role in the ecosystem, often choose to accumulate their holdings instead of selling them daily. They do this in anticipation of a bullish market, a sentiment supported by Bitcoin’s 59% appreciation year-to-date in 2024. This collective expectation of market appreciation further restricts the supply available for sale, potentially driving prices higher.
However, some analysts caution against overly simplistic expectations of post-halving price surges, pointing out that Bitcoin’s price trajectory over the past 15 years has been influenced by various external factors. These factors include overall economic trends, investor risk appetite, monetary policies, and Bitcoin’s correlation with the stock market. Given this complexity, relying solely on historical patterns from previous halvings may be overly optimistic.
In preparation for the Bitcoin halving, professional traders are increasingly utilizing options strategies. This approach allows them to leverage positions with a relatively small upfront deposit, avoiding the direct risk of liquidation associated with futures markets.
The open interest for options expiring on June 28 at Deribit has reached $4.5 billion, indicating a significant imbalance between bullish and bearish positions. Bullish call options outnumber bearish put options by threefold. However, a deeper analysis is necessary as the cryptocurrency trading community tends to lean towards optimism.
There are call options with extremely high targets, such as $140,000 and $200,000 for the June 28 expiry, which may be overly ambitious. Excluding these high targets, 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 profitability potential. Currently, there is only $250 million open interest in put options with a strike price of $57,000 or higher.
Bitcoin’s unexpected performance surge has caught bearish traders off guard. Factors such as 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 have contributed to this. As a result, bearish scenarios related to the Bitcoin halving are becoming increasingly unlikely.
Speculations of a “death spiral” triggered by reduced block rewards and a subsequent decline in miner participation have consistently been debunked. Bitcoin’s network adjusts its difficulty every 2016 blocks to ensure stability, even in the face of fluctuating hashrate levels.
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, indicating a market inclination towards neutral-to-bullish strategies for the Bitcoin halving, at least by the June 28 expiry.
It is important to note that this article does not provide investment advice or recommendations. Every investment and trading decision involves risk, and readers should conduct their own research before making any decisions.