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Digital Currency Revolution Series: Bitcoin Halving And Hedging As Underlying Price Rests Above $9k
Next Tuesday is the expected date of the upcoming 4-year block reward halving for the bitcoin network, when the number of new bitcoins that are created via the block reward is reduced by half.
The next halving will be the third such event, and the current block reward of 12.5 bitcoins will reduce to 6.25 bitcoins.
Hash-rate has increased by ~31% in the lead up to the 2020 halving, meaning miners have increased block production in anticipation of the supply-side event.
Ahead of this fundamental event, bitcoin price has continued its oscillating in a range but bullish streaks remain intact (1st chart) as expected in our previous post, the renewed strength by edging higher above $9.2k levels. Although the pair BTCUSD, has surged considerably so far and staged for 8th consecutive weeks’ rallies (refer 2nd chart) amid pandemic coronavirus crisis, some sceptics of crypto-space still looks apprehensive ahead of block-halving event that is scheduled for 13th of May that drives them to maintain smart hedging at least.
Accordingly, the long hedges have already been advocated using CME BTC Futures about one and half month ago. In addition, 1m ITM call options have also been recommended.
These positions have been functioning as per our expectations so far, if we keep speculating on the next upside target and accumulate fresh bitcoins, it would be unwise. Instead, one can certainly uphold the above advocated long hedges for now.
While on a broader perspective, the pioneer crypto has risen above 100-EMAs and retraced 23.6% Fibonacci levels of the Dec’2018 lows and all-time highs in Dec’2017 (refer 2nd chart). Please be noted that since mid-March, BTC has spiked from $3,858 to the current $9,306 which is 140% rallies. And, from April'16, the BTC has spiked from $414 to the all-time highs of $19k, currently, trading decisively at $7.5k levels, which is still a mammoth 1,660% rallies.
Hence, fresh accumulation is advisable at this juncture, while for those who are already holding bitcoins are advocated the above-mentioned hedging strategies.