As the Bitcoin (BTC) recovery rally continues, $ 90,000 is now the key level in which things could get interesting. The projection is mainly based on the current positioning of options market manufacturers.
Market manufacturers, also known as dealers or MMS, are responsible for providing liquidity to the order book. They occupy the opposite side of investor trades and work to maintain exposure to the neutral market for coverage in spot and future markets. They earn money with the difference between what they pay for an asset and how much they sell it, known as the offer differential.
The data of the Bitcoin of Deribit traced by Amberdata shows that market manufacturers are “short gamma” in the $ 90,000 strike. What that means is that as the price of Bitcoin approaches that level, market manufacturers will need to be sold when the spot price falls and buy when it increases to maintain a position in the neutral market. These coverage activities could increase market volatility.
“Taking into account that the negative gamma will still significantly affect the market after the agreement, MMS’s coverage behavior can further promote price fluctuations,” said Griffin Ardern, the main author of Blofin Academy and head of Blofin Research and options, Coindesk. “But the possibility of upward price movement seems to be greater for now.”
Gamma represents the change rate in Delta, which in itself measures the sensitivity of the price of an option to changes in the price of the underlying asset. Keeping short gamma means maintaining a short position in options, which can lead to financial loss, especially during periods of high volatility. So, when market manufacturers are short gamma, they must trade in the market management to maintain a neutral book in the market.
The opposite is the case when market manufacturers are long gamma. At the end of last year, market manufacturers were long gamma at $ 90,000 and $ 100,000, which led to consolidation between these levels.
The graph shows the gamma levels at strike prices through the expiration. It is clear that the $ 90,000 strike will continue to be the one with the most negative delta after the quarterly agreement that is due this Friday.
In other words, the coverage behavior of distributors could increase to market changes of around $ 90,000.
According to Ardern, the Gamma profile of the BTC concessionaire after the expiration of Friday will be similar to Token Paxg backed by Gold.
“After eliminating the impact of the options about to be resolved, PAXG has a GEX distribution similar to BTC. The price obtains support after a significant decrease in the price and finds resistance when it increases significantly, that is, a wide range of fluctuations,” Ardern said.
