- Bitcoin‘s recovery rally faces a critical test at $90,000, where market makers hold “short gamma” positions according to Deribit options data.
- Market makers will need to adjust their hedging strategies near this price level, potentially amplifying market volatility.
- Following Friday’s quarterly options settlement, the $90,000 level will remain the most significant negative delta point, similar to patterns seen in Gold-backed PAXG.
Bitcoin’s upward momentum has identified $90,000 as the next critical threshold where market dynamics could intensify volatility. This price target emerges primarily from current positioning by options market makers who maintain significant “short gamma” exposure at this level, according to data analytics from Deribit’s bitcoin options market.
Market makers—the financial entities responsible for maintaining liquidity in trading markets—find themselves in a position that could amplify price movements as Bitcoin approaches the $90,000 mark. These entities, which operate by providing continuous buy and sell quotes, must continuously adjust their positions to maintain market neutrality.
Griffin Ardern, chief author at BloFin Academy and head of BloFin Research and Options, explained to CoinDesk: “Considering that negative gamma will still significantly impact the market after settlement, the hedging behavior of MMs may further promote price fluctuations. But the possibility of upward price movement seems to be greater for now.”
When market makers hold “short gamma” positions at a particular price level, they must sell into falling markets and buy during rising markets to maintain balanced exposure. This requirement to trade in the direction of market movements can create a self-reinforcing cycle that accelerates price volatility.
The technical concept of “gamma” represents how quickly an option’s delta changes as the underlying asset’s price moves. Delta itself measures the rate at which an option’s value changes relative to movements in the underlying asset. Market makers holding short gamma positions face increased risk during volatile periods, forcing them to engage in hedging behaviors that can further influence market dynamics.
Data from Amberdata shows that the $90,000 strike price will continue to hold the most significant negative delta position even after this Friday’s quarterly options settlement. This concentration of risk suggests that market-maker hedging activities could create notable price fluctuations around this level.
This situation contrasts with market conditions observed toward the end of last year when dealers maintained “long gamma” positions at the $90,000 and $100,000 price levels, which contributed to price consolidation between those thresholds.
According to Ardern, Bitcoin’s dealer gamma profile following Friday’s expiration will resemble that of the gold-backed PAXG token. “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,” he noted.
The gamma exposure (GEX) distribution suggests Bitcoin may experience both support during significant downturns and resistance during substantial rallies, potentially creating a wider trading range with increased volatility as market makers adjust their hedging strategies.
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