Bitcoin’s recovery may still have further to go as traders caught on the wrong side of volatility positions begin unwinding their bets, potentially adding fresh momentum to the market, according to Alexander Blume, founder and CEO of Two Prime.
Blume said investors have repeatedly sold Bitcoin call options, keeping implied volatility at relatively low levels while leaving those traders vulnerable to a sharp move higher. If BTC continues to rise, those call sellers could be forced to hedge or close their positions, creating additional demand for Bitcoin.
“There are still a meaningful number of people short,” Blume said, warning that selling Bitcoin volatility at historically depressed levels has been a particularly unfavorable trade.
Bitcoin has staged a strong recovery in recent weeks, briefly breaking above $82,000 on Thursday for the first time since May. It was trading near $78,500 at the time of publication.
Several factors initially supported the rebound, including softer bond yields, larger Treasury debt buybacks and expectations that the Federal Reserve could leave interest rates unchanged in September. Spot Bitcoin ETFs recorded $731 million in inflows Thursday, their strongest single-day performance since January. However, stronger-than-expected jobs data on Friday pushed market expectations toward a potential Fed rate hike.
Two Prime, a New York-based institutional Bitcoin asset manager and lender, provides services to corporate treasuries, miners, family offices and other investors. Founded in 2019, the firm says it has access to $3 billion in lending capacity.
Funding rates point to room for further gains
Despite Bitcoin’s rapid advance, perpetual futures funding rates have not reached the elevated levels usually associated with excessive leverage or a market peak, Blume said.
That indicates the current rally may not be primarily fueled by speculative traders taking on large leveraged positions. Spot ETF demand and renewed purchases from Bitcoin treasury companies are also contributing to the move, he said.
Strategy and Strive have resumed buying Bitcoin, creating a potentially self-reinforcing cycle. As BTC prices increase, these companies may find it easier to raise capital, which can then be deployed toward additional Bitcoin purchases.
Blume said Bitcoin’s implied volatility fell to around 23%-24% last month before climbing into the 40% range during the latest rally. Although the rise is notable, those levels remain relatively low compared with Bitcoin’s historical volatility. A further increase could leave traders who sold calls facing greater pressure to hedge their exposure.
$60,000 remains an important floor
Bitcoin appears to have established support around $60,000, provided global economic conditions remain relatively stable, Blume said.
The largest risk would be a major downturn in stocks and other risk assets. “If there is a broader collapse in risk assets, bitcoin will fall as well,” he said.
High Treasury yields, elevated oil prices and persistent inflation remain potential obstacles for Bitcoin and other risk assets. Still, Blume believes the market’s widespread bearish positioning could magnify Bitcoin’s response if economic data begins to improve, even modestly.
He expects the Trump administration to emphasize economic stability while continuing to favor lower interest rates.
Blume also cited planned adjustments to parts of the personal consumption expenditures price index, saying the changes could result in lower reported inflation figures and potentially improve expectations for future monetary easing.
Bitcoin miners turn to debt
The stronger crypto market is benefiting Two Prime’s lending business as well, with Blume noting that demand for financing generally increases alongside Bitcoin prices.
Bitcoin miners, meanwhile, are taking different approaches to the industry’s growing shift toward artificial intelligence. Cipher Mining and TeraWulf have moved aggressively toward AI infrastructure, while CleanSpark and MARA are attempting to maintain their Bitcoin operations alongside investments in AI and power infrastructure.
MARA sold more than 23,000 BTC during the first half of the year but has since chosen to borrow against its remaining holdings instead of selling additional Bitcoin. In August, the miner secured $600 million from Coinbase and Two Prime.
According to Blume, the deal demonstrates how large mining companies can generate liquidity from their Bitcoin reserves without giving up exposure to potential future gains in the asset’s price.
