- Traders reduced risk exposure as Bitcoin’s price stabilized.
- Supply restrictions and hodler sentiment could amplify Bitcoin’s upward moves.
In the wake of Bitcoin[BTC]After the recent price increase, optimism among traders was high. However, some signs indicated that their enthusiasm is waning.
Read Bitcoin’s [BTC] Price forecast 2023-24
Lower volatility expected
Market data showed that options market makers dealing with Bitcoin increasingly took short gamma positions as the spot price of BTC rose. This indicated their anticipation of reduced price volatility. In the options market, short range means that dealers are positioned in a way that benefits from price stability.
Alex Thorn, an analyst, emphasized the importance of gamma dynamics. When options traders are short and the price of an asset rises, they must buy that asset (in this case Bitcoin) to maintain delta neutrality.
The delta represents the extent to which the option’s price changes due to changes in the price of the underlying asset. According to data from Amberdataio, the analysis showed that options traders have increasingly taken short gamma positions. This started when the price of Bitcoin was around $28,500 and above.
Specifically, when the price reaches $32,500, these market makers will have to buy approximately $20 million worth of Bitcoin for each subsequent 1% price increase. This positioning suggested that market makers will need to buy more Bitcoin as the spot price rises, potentially adding to the upward price momentum.
options market makers #bitcoin are increasingly short range as the spot price of BTC rises.
if you are short on gamma and the spot px increases, you need to buy a back spot to stay delta neutral.
this should amplify the explosiveness of any short-term upward move in the short term. more 👇 pic.twitter.com/J0satUAilk
— Alex Thorn (@intangiblecoins) October 23, 2023
On the other hand, Thorn also noted that dealers had positioned long range in the $26,750 to $28,250 range. When they are long gamma and the spot price falls, they must also buy back the assets to maintain delta neutrality. Therefore, any downward price movement in the short term will likely encounter resistance as option traders buy back Bitcoin to manage their risk.
Source: Galaxy Research
BTC continues to see green
According to the latest available data, Bitcoin was trading at $30,621 at the time of writing. The cryptocurrency showed multiple higher highs and higher lows over the past week. This has contributed significantly to a bearish trend. The Chaikin Money Flow (CMF) indicator was at 0.12, indicating some upward buying pressure, albeit relatively weak.
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Furthermore, On-Balance Volume (OBV) for Bitcoin has increased significantly in recent weeks. The OBV measures the volume flow into and out of an asset and can be an indicator of price developments.
Source: trading view
