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Trading desks are springing into action as bitcoin\u2019s price and crypto dominance test levels not seen for the better part of a year.<\/p>\n
The price of bitcoin topped $35,000 for the first time since the 2022 Terra stablecoin collapse after BlackRock\u2019s iShares Bitcoin Trust was listed on the DTCC\u2019s website \u2014 driving speculation that SEC approval of a spot bitcoin ETF was imminent. The listing was removed earlier today.<\/p>\n
According to experts who spoke with Blockworks, in the immediate aftermath of bitcoin\u2019s surge, derivatives buyers are being forced to unwind short positions, possibly contributing to the price spike.\u00a0<\/p>\n
In the longer term, volatility indicators may be showing cooling sentiment from funds betting on bitcoin\u2019s (BTC<\/a>) price movement.\u00a0<\/p>\n Read more:<\/strong> BlackRock bitcoin ETF no longer listed on DTCC\u2019s website<\/a><\/p>\n Spencer Hallarn, global head of OTC trading at GSR, said in a statement shared with Blockworks that price increases driven by speculation on approval for a US spot bitcoin ETF<\/a> have led to a short squeeze on derivative positions.\u00a0<\/p>\n After facing margin calls on their \u201cshort volatility positions,\u201d option sellers are \u201cbuying back sold call options\u201d and thus driving up bitcoin\u2019s price, Hallarn said.<\/p>\n Notably, the derivatives exchange Deribit announced<\/a> Monday that it would be raising its margin requirements \u201cin light of potential rapid price and volatility movements.\u201d The increased margin will force traders to put up more collateral, in theory protecting against a liquidity crunch.<\/p>\n In a message shared with Blockworks, Luuk Strijers, Deribit\u2019s chief commercial officer, said the platform\u2019s reserves are safe and Deribit has \u201cplenty of margin for all open positions.\u201d A Deribit representative added that the company hasn\u2019t seen its current levels of trading activity since 2021.<\/p>\n After funds work through call option headaches, analysts are predicting a price reversion.\u00a0<\/p>\n QCP Capital said<\/a> in its markets report that risk reversals, an indicator for investor feelings on future volatility where higher figures imply bullishness, reached their highest point in the past year during bitcoin\u2019s climb. The report adds that \u201cderivative markets are implying\u2026that levels are a little stretched here\u201d and the fund is closing out some of its bitcoin exposure.<\/p>\n QCP\u2019s risk reversal chart, shared with Blockworks, shows risk reversal falling to levels consistent with the past few months after its momentary peak.<\/p>\n \u201cYou would expect a little retracement even if you assume that we are in a real upturn,\u201d Matteo Greco, research analyst at Fineqia International, said.\u00a0<\/p>\n Greco cautioned against making too much of indicators like risk reversal without knowing the precise strategy with which funds entered the current upswing.<\/p>\n Don\u2019t miss the next big story \u2013 join our\u00a0free daily newsletter<\/a>.<\/strong><\/p>\nOptions sellers face a squeeze<\/h2>\n
Sentiment indicator shows funds reining in expectations<\/h2>\n
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