Major players in the bitcoin options market are eyeing a break of the $36,000 level, which could trigger a fresh wave of liquidations. CoinDesk reports.
According to Amberdata and Galaxy Digital, amid the rally of the past weeks, demand for higher-strike call options has surged recently.
As a result, market makers have built up a sizable net short gamma should the price breach the $36,000 mark.
In other words, market makers would be forced to buy the asset on the spot market as its price rises to maintain delta-neutrality.
According to crypto media, a similar situation in October led to a jump in the price of digital gold from $30,000 to $35,000.
The current positioning of market makers and its expected impact on the spot price contrasts with the situation at the start of this year, according to media reports.
Back then, major players had a net long gamma — buying low and selling high on the spot/futures market to maintain delta-neutrality. This further amplified the squeeze in market volatility.
Alex Thorn, head of research at Galaxy Digital, predicted a new wave of short squeezes if the price of digital gold reaches the $35,750–$36,000 area. According to his calculations, dealers will need to increase longs by $20 million for each 1% rise.
Earlier, analyst and head of Factor LLC Peter Brandt urged bitcoin traders to brace for a bruising.
Earlier, Glassnode analysts noted BTC crossing key barriers near $28,000, both technically and on-chain in nature.
Prior to that, experts based on assessments of capital flows between hodlers and speculators concluded that the current structure of Bitcoin’s market bears resemblance to the recovery phase after bear dominance in 2016 and 2019.