Recent data from both Amberdata and Galaxy Digital paints an optimistic picture for Bitcoin’s future price trajectory, suggesting a possible swift surge beyond the $36,000 mark. This projection is based on the strategies currently being deployed by options market makers.
Bitcoin’s recent impressive 27% rally has sparked a surge in demand for high strike price call options. This surge in demand has resulted in a notable net short gamma exposure above $36,000 for market makers. To maintain a balanced portfolio, these market makers have been increasing their purchases of Bitcoin in the spot market as its value continues to rise. This strategic move, commonly referred to as a “gamma squeeze,” has the potential to further accelerate the ongoing rally.
According to research by Galaxy Digital, if Bitcoin’s price reaches a range between $35,750 and $36,000, options dealers may find themselves needing to acquire $20 million worth of spot Bitcoin for every 1% increase. This scenario could serve as a catalyst for a significant surge in Bitcoin’s price.
This current market trend stands in stark contrast to earlier this year when market makers held a net long gamma position. During that period, they maintained their portfolios in a neutral position by managing the bid-ask spread in the spot/futures market, resulting in a period of lower volatility.
Options serve as financial derivatives that grant buyers the right to transact an asset at a predetermined price at a later date. The prevailing bullish sentiment within the Bitcoin options market indicates traders’ anticipation of a potential further upswing in Bitcoin’s value.
