Analysis: Bitcoin plunges into danger zone, options factors intensify market volatility

ChainCatcher News, according to Bloomberg, bitcoin has plummeted, putting the market in a dangerous situation. Option-based sell-offs have further intensified volatility. Bitcoin has fallen by about 25% so far this month. This decline is mainly driven by spot selling, including outflows from major exchange-traded funds (ETFs), sales of long-dormant wallet assets, and a decrease in demand from momentum investors, among other factors.

On the other hand, option trading positions have also amplified price fluctuations. When bitcoin falls below certain price levels, traders need to adjust their hedges to maintain neutral positions. This process, known as "Gamma exposure," further magnifies price volatility. One key level is $85,000, which was breached on the 21st. There is concentrated demand for put options near this strike price, forcing market makers to hedge large exposures. In such situations, traders are usually in a "short Gamma" state and will further sell bitcoin to maintain balance, thereby accelerating the decline.