🚨💸 Bitcoin‘s $90K Showdown: Will Market Makers Spark Volatility? 🚨💸
What to know:
- BTC options market makers could inject volatility into the market around the $90,000 level.
- That price will remain a potential area of volatility following Friday’s quarterly settlement.
As bitcoin’s (BTC) recovery rally continues, $90,000 is now the key level where things could get interesting. The projection is based mainly on the current positioning of options market makers. But let’s be real, who needs projections when you have market makers playing a game of “volatility roulette”?
These market makers, also known as dealers or MMs, are like the ultimate gamblers. They occupy the opposite side of investors’ trades and work to maintain a market-neutral exposure by hedging in spot and futures markets. It’s like they’re trying to win a bet, but with other people’s money.
Deribit bitcoin options data tracked by Amberdata shows market makers are “short gamma” at the $90,000 strike. What that means is that as the bitcoin price moves closer to that level, market makers will need to sell when the spot price drops and buy when it rises to keep a market-neutral position. It’s like they’re trying to catch a falling knife, but with a lot more math.
“Considering that negative gamma will still significantly impact the market after settlement, the hedging behavior of MMs may further promote price fluctuations,” Griffin Ardern, the chief author of BloFin Academy and head of BloFin Research and Options, told CoinDesk. “But the possibility of upward price movement seems to be greater for now.” Ah, great, because who doesn’t love a good game of “will it go up or down?”
Gamma represents the rate of change in delta, which itself measures the sensitivity of an option’s price to changes in the underlying asset’s price. Holding short gamma means holding a short position in options, which can lead to financial loss, especially during periods of high volatility. So when market makers are short gamma, they must trade in the market’s direction to maintain a market-neutral book. It’s like they’re trying to tame a wild beast, but with a lot more risk.
The opposite is the case when market makers are long gamma. Toward the end of last year, market makers were long gamma at $90,000 and $100,000, which led to consolidation between these levels. Ah, consolidation, the ultimate buzzkill.
The chart shows gamma levels at strike prices across expirations. It’s clear that the $90,000 strike will remain the one with the most negative delta following the quarterly settlement due this Friday. So, buckle up, folks, it’s going to be a bumpy ride.
In other words, the hedging behavior of dealers could add to market swings at around $90,000. Because what’s a little volatility among friends?
According to Ardern, the dealer gamma profile of BTC following Friday’s expiration will look similar to the gold-backed PAXG token. Ah, PAXG, the ultimate symbol of stability and reliability. Said no one ever.
“After removing the impact of options about to be settled, PAXG has a similar GEX distribution to BTC. The price gets support after a significant price decline and encounters resistance when it rises significantly, that is, a wide range of fluctuations,” Ardern said. Ah, because what’s a little unpredictability among friends?
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2025-03-26 15:29