Traders watch $6.8B Bitcoin and Ether options expiry.

The crypto market experienced a surge in activity last week as Bitcoin’s value rose over 15%, marking its best performance since March. However, a significant event is expected to occur soon. On Friday at 08:00 UTC, some 150,633 Bitcoin options contracts worth $4.57 billion and 1.23 million Ether contracts valued at $2.3 billion will expire on the Panama-based Deribit exchange, which controls over 85% of the global options activity. Investors have recently bought call options with strike prices at and above $30,000, meaning that level has the highest open interest. However, market makers/dealers hold a significant amount of “negative (short) gamma” exposure, which means a slight move away from $30,000 could result in an explosive rally or price slide. This is because dealers, when holding net-negative gamma exposure, “buy high and sell low” when the underlying picks up a bullish or bearish momentum to maintain a neutral market exposure. In other words, if Bitcoin builds momentum above $30,000 as expiry approaches, dealers will buy the cryptocurrency in the spot and futures markets. That could lead to an exaggerated price rally, often called a gamma squeeze, or sling-shot effect. On the flip side, dealers will be forced to sell on a potential decline below $30,000. In the case of Ether, market makers have accumulated long gamma positions, and hence the risk of a gamma squeeze in Ethereum’s native token is relatively low.

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