Bitcoin’s Rally to Record Highs Puts Focus on $115K Where an ‘Invisible Hand’ May Slow Bull Run
Bitcoin’s recent price surge to record highs above $111,000 has fueled investor optimism, but potential market maker hedging activities could temper the ascent. Analysts anticipate continued strong demand, with some suggesting a potential rise to $180,000 by year’s end.
Alexander S. Blume, CEO of Two Prime, attributes the price increase to dwindling over-the-counter (OTC) supply fueled by corporate treasury purchases and potentially, sovereign demand. This activity, largely unseen in exchange trading volumes or derivatives markets, suggests a potentially significant price acceleration.
Ryan Lee, chief analyst at Bitget, cites several factors contributing to the bullish outlook: spot ETF inflows, reduced post-halving supply, and increasing institutional adoption. He also points to Moody’s downgrade of the U.S. sovereign credit rating as a catalyst, driving interest in Bitcoin and Ether as hedges against fiat currency risk. Bitcoin’s resilience above $103,000 amidst volatility underscores its growing acceptance as a strategic reserve asset.
However, Jeff Anderson, head of Asia at STS Digital, cautions that hedging activities by options market makers/dealers around $115,000 and beyond could impede the rally’s momentum. Dealers, responsible for maintaining market liquidity, often hold offsetting positions to remain net-price neutral.
Data from Deribit’s BTC options market, analyzed by Amberdata, reveals significant “positive gamma” exposure at and above the $115,000 strike price. Positive gamma means dealers are long call or put options, requiring them to sell the underlying asset (Bitcoin) as prices rise to maintain their delta-hedging positions. This creates a countervailing force to price increases.
The substantial positive gamma, extending from $115,000 to $150,000, stems from investors selling higher-strike call options to generate yield. Anderson notes that clearing this gamma resistance at $115,000 is crucial for the rally to gain significant further momentum. The presence of this hedging activity suggests a potential temporary slowdown in the price increase, despite the underlying bullish sentiment and increasing institutional demand.
