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Trader makes a $20 million “butterfly” bet to protect against a Bitcoin (BTC) price drop to $47,000

A big Bitcoin (BTC) options bet took place on Tuesday, aiming to profit from a possible short-term Bitcoin price drop, with the floor set at $47,000.

The trader purchased 100 lots expiring March 29 from crypto block trading service Greeks.Live and put options at strike prices $50,000 and $43,000, partially funded by selling 200 lots of similar expiration puts at $47,000 U.S. dollar.

A put option gives the buyer the right, but not the obligation, to sell the underlying asset at a later date at a predetermined price. A put buyer is implicitly bearish in the market while a call buyer is bullish.

The so-called block trading mathematically costs over $20 million, Greeks.Live told CoinDesk. A block trade is a large transaction conducted outside of the regular public market and is synonymous with institutional activity.

The strategy achieves maximum profit if Bitcoin falls to $47,000 on expiration day. The forecast therefore assumes that prices will fall in the next few weeks, but not below $47,000. The payout chart shows a maximum win in the middle and a fixed loss in case prices exceed the two ends, mimicking the body of a butterfly. Therefore, the strategy is called a “butterfly bet”.

The simulated payout chart shows the peak profit at $47,000, with breakeven values ​​at $44,201 and $49,770.

“Whales have continued to add to their short positions, betting that Bitcoin will fall slightly before March 29,” Adam, analyst at Greeks.Live, told CoinDesk.

“Recent block trades have focused on two directions – short price or long volatility. The term selection was mostly focused before the BTC halving. Looking at the characteristics of the trades, it is likely that traders are holding spot positions and buying hedging positions,” Adam added.

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