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Market makers are hedging high strike options on Bitcoin, and this may limit its surge from $90,000 to $100,000. According to Amberdata, dealers have sold Bitcoin options on Deribit at these strikes. When gamma is high, market makers usually buy when prices drop and sell when they rise, maintaining a neutral position. This, in turn, dampens price volatility. “If the market reaches those levels, prices might struggle to rise unless sentiment gets even more bullish,” said Greg Magadini, Amberdata’s Director of Derivatives.

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Dealers have sold Deribit-listed BTC options at $90,000 and $100,000 strikes, as reported by Amberdata. The rally could slow down if prices reach these levels.

In the midst of Bitcoin’s impressive price surge, one element might hinder its rise above $90,000, possibly keeping it roughly around that price level. This element is market makers or dealers, entities that inject liquidity into the order book and take profits from the bid-ask spread, constantly trying to stay market-neutral.

Bitcoin options traders on the Deribit exchange appear to have a big positive “gamma” exposure at $90,000 and $100,000 strike options. Basically, that means people have been selling options at these prices. This left market makers, who are always on the other side of the trade, holding a large number of long positions.

When market makers have a long or positive gamma exposure, they usually buy the underlying asset when prices fall and sell when prices rise. This action is meant to keep the direction of their net exposure neutral. However, this hedging often keeps volatility down, lowering price swings.

For Bitcoin, this could mean market makers will likely trade against the market direction between $90,000 and $100,000. This could keep the prices within that range, assuming everything else remains the same.

Amberdata’s Director of Derivatives, Greg Magadini, stated that significant trading occurs up to the $90K level for options expiring on the 29th of November and 27th of December. However, dealers have bought the $90k-$100k+ range. “If the market reaches those levels, prices might struggle to rise unless sentiment gets even more bullish,” Magadini added.

Options are contracts that let the buyer but don’t oblige them to buy or sell an asset at a set price at a later date. A call option gives the right to buy, while a put option confers the right to sell.

The net gamma exposure helps determine how strongly an options market maker needs to buy or sell the underlying asset to keep overall exposure neutral. Bitcoin is currently trading just above $82,000, only 8% away from the critical $90,000 level.