a year ago
The Event that Will Affect the Bitcoin Price is Taking Place on Friday!
Crypto traders are waiting for the expiration of 56.8 billion worth of Bitcoin and Ethereum options on Friday. Sellers are flooded with a record level of negative gamma in BTC. With just a small move in the spot price, "we could witness fireworks," says one observer.
Friday will be an important day for Bitco and Ether
Kriptokoin.com as you have been following. Bitcoin has shown its best performance since March, #TBTC has recorded an increase of more than 15%, this month, Also, last week, bullish winds began to blow in the crypto market again. Now an important event is looming on the horizon
At 08:00 UTC on Friday, 150,633 BTC options contracts worth $4.57 billion and 1.23 million ETH contracts worth $2.3 billion will expire on the Panama-based Deribit exchange which controls more than 85% of global options activity. According to Amberdata expired Bitcoin contracts account for 43% of the total open interest.
What is the impact on the Bitcoin price?
Investors have recently purchased call options with strike prices of $30,000 and above. As a result, this level has the highest open interest (or the number of active contracts). In addition, markat makers/dealers who crease order book Liquidity by taking the other side of investors transactions have a significant amount of "short gamma" exposure
Options are derivative contracts. They give me buyer the right to buy or sell an asset at a predetermined price at a later date. The call option gives the right to buy, which is a bullish position. The put option provides the right to sell, which is a bear position. Short (negative) mearis holding a short position in gamma, call or put options. The large accumulation of open interest at $ 30.000 means that the spot price may move towards this level until the maturity date
Meanwhile, the negative gamma position of the dealers means that a slight Deceleration from the $30,000 could turn into an explosive rally or price drop. This is because dealers with a net-negative gamma position "buy from high and sell from low" when the underlying asset gains bullish or bearish momentum in order to maintain a neutral market position
In other words, if Bitcoin gains momentum above $30,000 as the maturity date approaches, dealers will buy the cryptocurrency on the spot and futures markets. It is also possible that this will lead to an exaggerated price rally, which is often referred to as the gamma squeeze, On the other hand, sellers will have to sell in the face of the possibility of falling below $30,000.
"It's time to prepare the fireworks for BTC"
Greg Magadini, director of derivatives at Amberdata, said in the latest issue of the weekly newsletter, "This bullish] flow greatly affects the way dealers take positions. Also, before Friday's maturity deadline, we expect a historic negative gamma record. With just a small spot movement, we can witness the fireworks," he says.
The option gamma is the rate of change in the delta, which is the degree of sensitivity of options to a change in the price of the underlying asset. Gamma shows how the exposure to directional risk changes with fluctuations in the underlying asset. He also reveals how he is rising as the due date approaches. Market makers provide liquidity to an order book. In addition, they profit from the buy-sell difference by constantly hedging gamma risks to keep the book direction or delta neutral.
There is a big negative gamma on the $30,000 option strikes due on June 30. Source: Amberdata
According to crypto derivatives trader Christopher Newhouse, the impact of potential dealer hedging is stronger than usual this time. "Many of the top-side call strikes that will end this week are of a large size," Newhouse said. Also, there is the gamma centered around the Bitcoin trade at $30,000 and around. Dealer hedging flows as they approach maturity may have a more exaggerated effect on spot prices than smaller weekly maturity flows. Especially as the price approaches previous high levels and potential short liquidation levels," he says.
In Ethereum's case, the market makers have accumulated long gamma positions in the ETH market. Therefore, the risk of a gamma squeeze in #ETH is relatively low.