Bitcoin options surge to $500m as whales apply cautious strategies

The volume of Bitcoin put options traded in block trades has surged to over $500 million.

Block trades are large transactions typically made outside the open market to avoid impacting the market price directly. A put option gives the holder the right, but not the obligation, to sell an asset at a specified price (strike price) within a certain period.

According to Greeks.live, the trading activity was primarily focused on two strategies. The first was a bear spread strategy, typically used when an investor expects a decline in the market but wants to limit potential losses.

In this case, the bear spread involves buying put options at a higher strike price of $55,000 and selling put options at a lower strike price of $50,000, both with the same expiration date. 

BTC Block put options volume skyrocketed today, with a notional value of over $500 million.
Two types of trades dominated —— one was a bear spread consisting of 55,000Put/50,000Put, and the other was orders below $45,000 to liquidate put option positions.
These Block trades… pic.twitter.com/PwuvRn7vMy

— Greeks.live (@GreeksLive) March 1, 2024

The second strategy involved investors placing orders to close the put option positions if the price of Bitcoin fell below $45,000, indicating a protective measure to limit losses in a declining market.

The two strategies indicate spot whales’ increasing preference for protective puts, adjusting their positions in anticipation of market movements. Spot whales refer to investors holding large amounts of spot Bitcoin and are influential in the market. In this instance, the spot whales are purchasing put options as a hedge against a potential drop in the Bitcoin price, protecting their investments from significant losses.

The trading strategies also suggest that Bitcoin whales are aware of a potential correction that might occur despite the bullish sentiment. Earlier this week, Matrixport co-founder Daniel Yan predicted that a 15% correction might be expected by the end of April. 

Euphoria: the sentiment of the market has come to a level where I think we should be cautious – may be a good idea to revisit my pinned tweet on the size of potential corrections. I think we should see another healthy ~15% correction by end-April.

— Daniel Yan (@_D_Y_A_N) February 28, 2024

On the other side of the spectrum, the futures market today has seen options traders increasingly betting that Bitcoin will reach its previous all-time high very soon. Investors and analysts are cautioned not to analyze these options trades in isolation but to consider them part of a broader investment strategy that includes spot holdings.