Key Insights
- Bitcoin’s price surge may be imminent if it breaks the $36,000 threshold, according to options market activity analysis.
- Rising demand for higher strike price call options has left options market makers significantly short on gamma exposure above $36,000.
- If Bitcoin surpasses $36,000, options dealers may need to buy substantial BTC positions, potentially accelerating price gains and pushing it past $40,000.
Bitcoin could be on the cusp of a major price surge if it manages to decisively break above $36,000, according to an analysis of options market activity.
Data shows that demand for higher strike price call options has risen sharply amid bitcoin’s recent rally. This has left options market makers significantly short on gamma exposure above $36,000.
Gamma refers to the rate of change in an option’s delta based on movements in the underlying asset’s price. When dealers are net short gamma, they hedge their books by buying the underlying – in this case bitcoin – as it rallies.
“If BTC moves higher to $35,750-$36,000, options dealers will need to buy $20 million in spot BTC for every 1% upside move,” said Galaxy Digital’s Alex Thorn. This self-reinforcing dynamic can accelerate price gains.
Similar gamma squeezes have preceded bitcoin breakouts in the past. This time, the setup indicates the crypto kingpin could quickly surge past $40,000 if the $36,000 threshold is crossed.
Dealers were net long gamma earlier this year, adding to volatility declines. Their positioning now reflects building momentum.
Of course, nothing is guaranteed in such a speculative market. But traders will be closely monitoring the interplay between spot price action and options hedging flows near $36,000. A decisive move past that level could see fireworks.
With positive sentiment returning to crypto markets, key technical milestones like $36,000 take on added significance. They represent psychological barriers where breaking above or below can accelerate trend shifts and shake up the landscape.