“All things are pointing towards if momentum keeps us going up, then we could see another violent move upwards,” said Luke Nolan, a research associate at digital-asset manager CoinShares. But even a small change in ETF flows could cause people to quickly deleverage, “it works both ways,” he said.
An influx of purchasers for short-dated options has increased Bitcoin fluctuations to the highest since last year’s collapse of crypto-friendly Silicon Valley Bank (SVB). The notional value of the March 29 call and put options contracts has increased to around $7 billion, far above the amount of any other contracts on a specific expiration date, according to data from Amberdata, finance.yahoo.com reported.
The jump in short-term options that have strike prices in a relatively small range is laying the groundwork for a what’s called a gamma squeeze, in which a change in price can trigger a swift swing in the market. The open interest for the contracts with the March 29 expiration date is clustered at $65,000, $60,000 and $70,000, a short distance from the current spot market price, according to data from Deribit.
“We can still see a huge amount of OTM (out of money) calls,” Nolan said. “If Bitcoin pushes to levels near that, then in my opinion we could certainly get a squeeze.”