Bitcoin Racing Toward $95k / Notes on Options ETF

With the spot Bitcoin option ETF being granted, there’s now another vehicle to exert greater buy pressure on the spot Bitcoin ETF itself - which is the underlying ETF for the options vehicle. We know BlackRock was first to the line with their own options ETF which started trading yesterday & grabbed $1.9 billion in trading volume the first day.

Price Feedback Loop Potential

There is a possibility that Bitcoin could enter a feedback loop if there’s a “negative gamma” situation. In other words, if traders get caught being over leveraged in one given position and Bitcoin squirts up above whatever the strike price for expiry is in those over leveraged contracts - the price could go on a run in that direction for a little while before settling down.

To translate - let’s say a bunch of traders are short Bitcoin at $100k (out of the money contracts) & for whatever reason there’s a volatile move that shoots Bitcoin up above $100k for some reason. That will result in the liquidation of a bunch of shorts & force market makers to cover positions going the other way (long) which will exacerbate the bullish price run past that point. So it’s entirely possible $100k could morph into $110k+ in a very short period of time.

The opposite could occur too if Bitcoin were to make a sudden move downward that catches leveraged long traders off guard. We’ve seen microcosms of this in crypto so far but not quite at the macro level we’ll be seeing it this time around if and when it does happen.