Bitcoin Price Stability at $100K Supported by Hedging Activity Amid Pullback Concerns
Bitcoin (BTC) and the broader crypto market are seeing increasing demand for bullish leveraged positions, suggesting that the market may be reaching an overheated stage. While market makers’ hedging strategies are expected to help keep Bitcoin supported around $100,000, this surge in activity raises concerns about potential pullbacks for other cryptocurrencies.
Bitcoin, the leading cryptocurrency by market cap, reached a new all-time high above $103,000 early Thursday, following President-elect Donald Trump’s decision to appoint Paul Atkins, a well-known pro-crypto advocate, as the chairman of the U.S. Securities and Exchange Commission (SEC). This news triggered a wave of buying, pushing funding rates for perpetual futures to new heights, signaling an overcrowded market and a strong demand for long positions. In such conditions, even a minor pullback could trigger significant liquidations (forced sales by exchanges due to margin calls), which could increase volatility.
Griffin Ardern, head of options trading and research at BloFin, a crypto financial platform, explained that the options market could provide crucial support. When options prices rise faster than the underlying asset, creating a positive gamma imbalance, market makers tend to sell their holdings to neutralize their exposure. Conversely, when the imbalance is negative, they purchase more of the underlying asset to counterbalance the price movement, limiting large swings.
“Bitcoin can remain relatively stable around the $100,000 level in the short term, due to the hedging activity of market makers,” Ardern told CoinDesk. “This support from the options market could help buffer the impact of any deleveraging, reducing the chances of a sharp decline.”
Bitcoin’s funding rates have skyrocketed, surpassing 100% annually, which is even higher than some speculative assets like Dogecoin (DOGE), according to data from VeloData. Other cryptocurrencies such as XRP, CRO, and XMR are also experiencing funding rates above 100%, reflecting growing demand for leveraged positions.
Felix Hartmann, founder of Hartmann Capital, noted that Bitcoin’s recent surge may be driven largely by leverage. “The volume-weighted average price suggests that Saylor has invested billions, and the funding rates indicate this final push was likely fueled by leverage,” Hartmann said, referring to Michael Saylor, executive chairman of MicroStrategy, the largest publicly traded Bitcoin holder. “I wouldn’t be surprised by a 20-30% correction from here. The 80s could be on the table.”
Hartmann also stressed that the continued rally requires more demand than what’s being driven by institutional buyers like MicroStrategy. Several analysts on social media have pointed out that either the market will keep pushing upward, validating the cost of maintaining bullish bets, or it will experience a sharp downturn if those positions become too crowded.
Even with the support of market makers’ hedging, Bitcoin’s price volatility could resurface as the year draws to a close.
“The positive gamma at $105,000 for options expiring on December 27 could provide enough stability to maintain the price, but once those options expire, the support will vanish, which could lead to increased price uncertainty,” Ardern warned.
Options are financial derivatives that give buyers the right—but not the obligation—to buy or sell the underlying asset at a predetermined price by a future date. Call options give the right to buy, while put options give the right to sell.
