Why Could Bitcoin’s Record Price Rally Be Stifled Between $90,000 and $100,000?

• According to Amberdata, BTC options listed on Deribit with a strikeout of $90,000 and $100,000 were sold to traders.

• The rally could lose momentum if prices reach these levels.

As Bitcoin {{BTC}}’s ongoing price rise exudes an aura of invincibility, a force threatens to slow the rise above $90,000 and potentially keep the cryptocurrency in a range above the said price level.

The power lies with market makers or traders – entities responsible for providing liquidity to the order book, profiting from the bid-ask spread, while constantly striving to maintain market-neutral exposure.

Those running the Bitcoin options market on crypto exchange Deribit currently appear to have significant positive “gamma” exposure to the $90,000 and $100,000 exercise options. In simple terms, this means that traders/investors have been selling options at these levels, leaving the market makers, who are always on the opposite side, long a large portion of their positions.

When market makers have long or positive gamma exposure, they tend to buy the underlying asset when its price falls and sell when it rises, keeping the direction of their net exposure neutral. This hedging acts as a volatility damper and limits price fluctuations.

In the case of Bitcoin, this means that market makers will likely trade between $90,000 and $100,000 against the market direction, keeping prices within a certain range assuming all other conditions remain the same.

“We see a lot of dealers owning property [buying] Optional up to the $90,000 handle for November 29th and December 27th. But the $90,000 to over $100,000 range has been sold to traders,” said Greg Magadini, director of derivatives at Amberdata.

“If the market gets there, there could be pricing issues unless sentiment turns even further positive,” Magadini added.

Options are derivative contracts that give the buyer the right, but not the obligation, to buy or sell the underlying asset at a future date at a predetermined price. A call gives the right to buy and the put option gives the right to sell.

Gamma is one of the critical “Greek” options and measures how much the price of an option increases when the price of the underlying asset moves. Net gamma exposure determines how aggressively an options marketmaker must buy or sell the underlying asset to keep the overall exposure neutral.

According to CoinDesk data, Bitcoin is currently changing hands just above $82,000, just 8% away from the crucial $90,000 mark.