Bitcoin momentum could fuel further short squeeze, says Galaxy exec
The post Bitcoin momentum could fuel further short squeeze, says Galaxy exec appeared on BitcoinEthereumNews.com.
After months of stagnation and false starts, the crypto market is gaining momentum. Renewed optimism over the likely approval of a spot US ETF fueled last week’s rally in both bitcoin (BTC) and ether (ETH), kick-starting market volatility once more. “The markets are constantly fluctuating, influenced largely by the sentiments of investors,” Konstantin Shulga, CEO and co-founder of Finery Markets told Blockworks. “In recent times, we have observed a squeeze in call options for options sellers, while future indicators are becoming less optimistic as the market adjusts to the sudden rise of bitcoin.” October was a turbulent month, with bitcoin’s price witnessing a significant 15% drive above $35,000 last week. With this backdrop, Alex Thorn, Galaxy’s head of firm-wide research, believes more upward momentum could become a likely. In a post on X, Thorn articulated the possibility of another gamma squeeze for the world’s largest digital asset. A gamma squeeze forces options dealers to adjust spot exposure rapidly, often leading to volatility expansion. In the case of negative gamma, even as the price of bitcoin moves higher, dealers need to buy up bitcoin in large quantities to remain properly hedged. “When dealers are short gamma and price moves up, or when they are long gamma and price moves down, they need to buy spot to stay delta neutral,” Thorn said. Should the asset’s price reach the $35,750-$36,000 range, Thorn suggests options dealers would need to purchase an additional $20 million in spot bitcoin for every 1% upward move. Although the impact of last week’s options expiries could potentially dampen such explosiveness this time around, Thorn maintains that the scenario is still in play. In addition to discussing the gamma squeeze, the Galaxy Research head examined a range of derived metrics based on on-chain data. Thorn highlighted a widening divergence between…
Filed under: News - @ October 31, 2023 10:08 am