Bitcoin BTC$111,410.92 It rose above $110,000, led by renewed optimism on U.S.-China trade relations. This pullback means BTC is currently trading at levels that could prompt market makers to further disrupt the price ahead of Friday's multi-billion dollar options expiry.
According to Deribit exchange-traded options market data tracked by Amber Data and Deribit Metrics, $13 billion worth of Bitcoin options (calls and puts) are set to expire on Friday. Specifically, dealers and market makers hold negative gamma exposures at strike prices of $100,000 and $111,000. This means that we have sold (written) more options than we have bought at these levels.
In such a scenario, market makers hedge their positions by trading with the market (buying when prices rise and selling when prices fall) to maintain a net delta (market)-neutral exposure.
Hedging activity typically increases as expiration approaches. This is because gamma sensitivity increases as expiration approaches, especially for at-the-money (ATM) or near-the-money options, such as those with strike prices of $110,000 or $111,000.
Gamma distribution for BTC dealers expires on October 31st. (Deribit/Amber Data)
The chart shows that dealer gamma is significantly negative between $105,000 and $111,000, indicating that trading activity may increase around these levels.
Beyond this range, gamma radiation exposure is net positive at $114,000.
As it turns out, Bitcoin's next big move may not be driven by fundamentals, but by mechanical hedging flows from option dealers.
