A hedge for bitcoin if it pulls back after hitting the $100,000 milestone

A hedge for bitcoin if it pulls back after hitting the $100,000 milestone
Source: CNBC

Bitcoin has been surging all year in 2024, but this week investors have seen "digital gold" vault above the monumental level of $100,000. President-elect Donald Trump has presented crypto-friendly expectations and revealed political changes at the SEC that further fueled the rally, pushing the digital coin up 140% in 2024.

I want to book profits and hedge out potential downside risk if investors take a bitcoin breather over the holidays. The first bitcoin ETF launched in early January of this year, the iShares Bitcoin Trust (IBIT), and other bitcoin funds that subsequently launched have attracted tens of billions of dollars of inflows throughout the year. IBIT is currently the largest in AUM with roughly $50 billion in assets.

Since the November 5 election results, IBIT has jumped up another 43%. Bitcoin is now ranked as the seventh most valuable global asset, surpassing companies like Tesla and Meta in market valuation. That last sentence alone should even inspire some 'HODLERs' to implement a hedge, right?

"The new all-time high daily mantra in all asset classes is just another reason to consider booking profits and spending some money on an insurance policy."

Furthermore, the risk-on correlation bitcoin has adopted to the Nasdaq 100 is a divergence from its initial characteristic as a safe-haven and non-correlated asset:

The Trade (Buying a Put Spread)

  • Bought the $56 1/17/2025 IBIT Put for $4.40
  • Sold the $50 1/17/2025 IBIT Put for $1.85
  • Costing $2.55 or $255 per one put spread

This is a hedge (with a defined cost) in case bitcoin cools off if big ETF rebalances overwhelm buyers short-term. In case bitcoin runs up to $150k, this put spread will expire worthless, but your bitcoin exposure will still participate in that meteoric appreciation.

"DISCLOSURES: (Long BTC and this spread.) All opinions expressed by CNBC Pro contributors are solely their opinions and do not reflect those of CNBC or NBC UNIVERSAL."