Trading Strategy: Post Bitcoin Halving, a Feeling of Déjà Vu?

As the narrative around the halving is fading, and after failing 3 times to break above the 10,000 level, BTC price has returned to the halving level seen on the 12th of May. If we compare this market to the 2016 halving, we are starting to see some resemblance. Let’s see why.

50 days before the 2016 halving Bitcoin was trading at $440. It rallied strongly and 25 days before the halving it peaked at $773. It then dropped back to $654, at the time of the halving. Bitcoin price went up 4% over the following 10 days to peak at $680. 15 days after the halving we were back to $654.

50 days before the 2020 halving Bitcoin was trading at $6180. It rallied strongly and peaked 5 days before the halving just above 10,000. It then dropped back to $8750, at the time of the halving. Bitcoin price then went up 12% over the following 7 days to peak at $9800. 13 days after the halving we were back to $8750.

If the story continues, we could be facing this scenario:

8800 is acting as a strong support level, with good buying volume there. If we manage to break below that, looking at technical patterns, we are in for a potential down move to the 7800 level. If we break that, we could be dropping to the low 6000.

Considering volatility has been dropping but skew remains elevated, we would advise against a naked put and rather recommend a put spread.

The 26 June 2020 8000/7000 put spread is worth 185 (at 8980 ref). It offers a max 5.3x pay out in $ and a max 6.8x pay out in bitcoin at $7000. A similar spread in September is a bit too premium heavy at the moment.

We would advise taking partial profit if we approach the 7800 level (considering volatility would have also spiked) and keep a smaller portion to play any further decline. If we break above 10,000, we see the probability of success diminished and would recommend closing it.

Disclaimer

The information and opinions contained in this research report have been compiled or arrived at from sources believed reliable but no representation or warranty, express or implied, is made as to its’ accuracy or completeness. Unless otherwise noted, all research reports provide information of a general nature and do not address the circumstances of any particular investor. Neither Covario nor its affiliates accept liability whatsoever for any investment loss arising from any use of this research report or its’ contents.

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