Predicting what Bitcoin could potentially do. đ„âš
Cryptocurrency enthusiasts are on high alert as Bitcoin's options market experiences a surge, with a notable focus on short-term options. The rising demand has triggered concerns about a "Gamma Squeeze," a scenario where market fluctuations accelerate due to price changes.
The intensified interest in short-term options raises the specter of a Gamma Squeeze, with market dynamics susceptible to rapid shifts.
Bitcoin's recent 20% surge and increased ETF investments, coupled with traders positioning for a breach of the $69,000 record level, contribute to the heightened market activity.
CoinShares' Luke Nolan suggests that if the momentum persists, a violent upward move could be imminent. However, the market remains sensitive, and a slight shift in ETF investments may prompt traders to swiftly reduce leverage.
The influx of buyers into short-term options has spiked Bitcoin's volatility to its highest level since the Silicon Valley Bank's downturn. On March 29 alone, options with a staggering $7 billion nominal value were traded.
Deribit data points to a clustering of contract strike prices at $65,000, $60,000, and $70,000, setting the stage for a potential Gamma Squeeze.
Large amounts of out-of-the-money (OTM) call options pose risks for sellers. Nolan highlights that as Bitcoin rises, option sellers may need to hedge their risk by buying the underlying asset, creating a self-sustaining cycle.
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