Analyzing Bitcoin option maps, we can come to the conclusion that we may be expecting a so-called "gamma squeeze", which can have a significant impact on the dynamics of the Bitcoin price and the entire cryptocurrency market accordingly.
What is gamma squeeze?
This is a phenomenon caused by large purchases of call options forcing market makers (i.e. sellers of these options) to hedge their positions by buying the underlying asset. The purchases of the underlying asset naturally begin to increase the buying pressure and lead to an even greater increase in the price, which in turn attracts even more call option buyers, creating a positive feedback loop. This is why gamma squeeze is known for causing the price of the underlying asset to increase exponentially.
Potential consequences in the current situation
As can be seen from the images above, the main number and volume of options falls on the following strike prices and expiration dates (i.e. the price and time of the option exercise):
- Oct 25, $70,000
- Nov 29, $75,000
- Dec 27, $75,000-100,000
- Mar 28, $100,000-120,000
Thus, to start the gamma squeeze flywheel, the Bitcoin price needs to go above $70,000 before October 25. Then it will have a month to grow by another $5,000 and thus not let the call option sellers out of their positions. Such dynamics will increase Bitcoin's chances of breaking the psychological level of $100,000 by the spring of next year.
Do you think Bitcoin will be able to realize a potential gamma squeeze to the delight of all crypto investors? #BTC
