With Bitcoin ascending to new highs above $59,000 after rallying over 40% in the past month, some traders are taking measures to protect profits from a potential pullback.
As per data from options analytics platform Greeks.Live, large traders known as “whales” have begun purchasing put options on Bitcoin with strike prices well below the current market rate. Puts provide the right but not obligation to sell the underlying asset at expiry, acting as a form of downside protection.
According to Source, That Greeks.Live noted an uptick in put buy orders valued over $5 million from whale accounts in the past 24 hours. The majority targeted strikes under $50,000 Bitcoin, implying traders are positioning for the possibility of a deeper correction from present levels.
This strategy of buying out-of-the-money puts is relatively uncommon during parabolic bull trends, according to Greeks.Live. However, it does occasionally occur when the market seems overextended, as implied by surging funding rates on perpetual swap exchanges.
Some experts argue perpetual funding, which tracks the premium traders pay to hold leveraged long or short positions, is nearing excessively bullish levels that could presage a sharp decline. By purchasing protective puts, large traders can help lock in profits while still retaining upside exposure if the rally persists.
The pickup in hedging activity comes alongside Bitcoin surpassing $59,000 for the first time earlier today. The world’s largest cryptocurrency has gained over 40% since late January, handily outperforming the broader crypto market.
Momentum has been boosted by preparations for Bitcoin’s next halving in April, which will reduce its supply inflation rate. Ongoing inflows to crypto investment vehicles like ETFs have also underpinned demand.
While the block reward halving and rising institutional access point to further potential highs, some believe the parabolic price rise over the past month makes the market vulnerable to a 10%+ pullback. Whale put purchases reflect efforts to reduce risk as Bitcoin tests new resistance levels close to the $60,000 psychological barrier.
