Bitcoin Is Trapped At A Level That Could Magnify Its Next Big Swing, Warns Glassnode

• Glassnode stated that Bitcoin is trading right at its biggest negative gamma cluster, an area where dealer hedging can amplify near-term price moves as market makers trade with momentum.
• The largest negative gamma clusters are around $65,000 and $70,000, pinning the spot around the most destabilizing region to hedge.
• Puts remain more expensive than calls across the curve, but the break below support did not spark a fresh wave of downside hedging.

The structure of the options market for Bitcoin (BTC) has left the cryptocurrency in a precarious position, according to Glassnode, with the price sitting right on top of its biggest negative gamma zone, which means the hedging activity of dealers risks amplifying whatever move occurs.

Glassnode said the largest negative gamma clusters are between $65,000 and $70,000, while the most influential positive gamma exposure is still out of range. That would put the spot around $66,700, in the sweet spot where dealer hedging can amplify short-term price moves, as market makers are required to buy into rallies and sell into declines.

Options Flow Stays Defensive

The flow of options has been skewed to the defensive side, Glassnode’s report said. Put buying was in the majority of premium trades over the last seven days, but call buying has increased in the last 24 hours, indicating that traders are active on both sides. 

Skew is still around 13% to 14%, and puts remain more expensive than calls across the one, three, and six-month tenors, said the report. The recent break below support did not lead to any meaningful expansion in downside hedging, which the report read as traders maintaining existing defensive positioning rather than chasing new protection.

The frame for the gamma picture is fragile, according to Glassnode. Bitcoin has fallen about 13% over the last week to the $67,000 range, and the report said realized losses have sped up to $1.35 billion per day, which is roughly $770 million of that from long-term holders capitulating from cycle-top positions. 

The rally earlier in May failed to breach the aggregate US spot ETF cost basis at just under $83,000, turning that level into overhead resistance and the average ETF investor back under water, said Glassnode.

Bitcoin’s price was trading at $65,896, down over 2% in the last 24 hours. On Stocktwits, Bitcoin was the top trending ticker. Retail sentiment around BTC remained in the ‘extremely bearish’ zone, while chatter stayed at ‘high’ levels over the past day.

Macro Pressure And ETF Outflows

U.S. job openings rose to 7.62 million in April, sending the 10-year yield back above 4.45%, causing markets to reprice Fed expectations towards a possible rate hike by year-end, the report said. 

Institutions de-risking ahead of price, rather than reacting to it, were blamed for U.S. spot ETFs seeing $4.21 billion of outflows in three weeks, the report said. Bitcoin is likely to remain vulnerable to further downside within a broader bear-market structure until spot demand strengthens, ETF investors are back in the profit, and selling pressure subsides, the report concluded.

Bitcoin’s price has fallen nearly 25% year-to-date and over 37% in the last 12 months.

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