Bitcoin’s Price Pivot: The $90,000 Threshold
A strong resistance is forming around $90,000, which could trigger further market activity and sophisticated trading strategies as Bitcoin (BTC) undergoes a recovery rally. Market maker estimates mark a solid influence on current market options and these estimates are already set to propel change, amplifying its value.
Market Makers and the Gamma Effect
The most important market maker in all transactions is the liquidity supplier in the order book and they keep track of the changing demand and supply to be able to market risks. Their moves often determine price movements and they face losses typically because of the spread between the buying and selling prices.
Short Gamma at $90,000: A Recipe for Volatility
According to Amberdata’s tracked Deribit Bitcoin options data, the $90,000 strike mark positioned market makers in a more volatile segment employing short gamma, which is the opposite of what was previously intended. Because they are short gamma, they stand to lose as soon as BTC approaches this mark, thus forcing them to offload assets at losses. Viable trade capture strategies around this hedging will likely accelerate volatility even further.
Hedging Behavior: Amplifying Price Swings
“While the negative gamma will continue to impact the market after the settlement, it is possible that MM hedging behavior may enhance price volatility,’’ said Griffin Ardern, chief author of BloFin Academy and head of BloFin Research and Options. Ardern has also been observed forecasting that the further upward movement in prices would be easier to achieve.
Understanding Gamma’s Influence
Gamma is the second derivative of an option’s pricing function with respect to its underlying asset, while delta is the first derivative. It reflects the sensitivity of an option’s price to fluctuations in the price of the underlying asset. When market makers are short gamma, they are said to have a short portfolio of options. This position is dangerous in times of high volatility or in the event of rapidly changing market conditions. In such cases, market participants need to trade in the direction of the market if they are to maintain a market-neutral book, which leads to further price increases.
A Contrast to Past Market Behavior
This situation is in contrast with the usual market conditions. Toward the latter half of Q4 last year, market makers held long gamma switches generating $90,000 and $100,000 while the price oscillated because of the accumulation of buying and selling orders at these levels.
Post-Settlement Outlook: Similar to Gold
The chart data suggests that delta-neutrality will be most negative at the \$90,000 strike and it will still be that way after the quarterly settlement is due this Friday. Also, Ardern does note that the dealer gamma profile of BTC after Friday’s expiration will bear resemblance to PAXG. “Removing the effect of settled options, PAXG has reciprocal GEX distribution to BTC. The value is supported after considerable falls and climbs significantly only to face some resistance post-ascension, meaning a wide band of volatility,” Ardern explained.
A Market on Edge: Is Volatility Imminent?
It does feel like the Bitcoin market is geared up for some explosive volatility one way or another as the price creeps towards the $90,000 mark. The market makers’ hedging actions because of supporting PAXG Bitcoin’s short gamma will add to the chaos. Advised to refrain from engagement. Although a bullish stance can be taken, this is not a place to let loose and exercise free will. Volatility can strike when the eye is not on the ball; hence, keep your head on a swivel.
