Alex Thorn Highlights Potential for Another Bitcoin Gamma Squeeze
In a recent statement via X (formerly Twitter), Alex Thorn, head of firm wide research at digital asset firm Galaxy, discussed the possibility of another Bitcoin gamma squeeze similar to the one seen last week. He explained that if BTCUSD moves higher to $35,750-36k, options dealers will need to buy $20m in spot BTC for every 1% increase, potentially causing explosiveness in the market.
Options Dealers and Price Movements
Thorn further elaborated on the mechanics behind this phenomenon. When dealers are short gamma and the price rises, or when they are long gamma and the price falls, they must buy spot BTC to maintain a delta-neutral position. Last week’s expiries will dampen potential explosiveness, but the situation is still in play. This means that the actions of options dealers can amplify price movements.
Understanding Market Dynamics
Thorn emphasized the importance of on-chain data in understanding these dynamics. He highlighted a growing divergence between supply held by long-term holders and supply that has moved within 24 hours. This suggests a decline in on-chain liquidity and a potential supply squeeze.
Thorn also mentioned the 4-year rolling Z-score of the market price to realized price ratio as an important metric. This indicates Bitcoin’s valuation relative to its historical average. The pattern is starting to resemble those seen before previous bull runs.
Another significant observation made by Thorn is the compression of relative cost bases, which typically occurs during bear or accumulation periods before bull markets. This suggests a consensus among different types of holders about Bitcoin’s value.
Analyzing Bitcoin Supply and Holder Behavior
Thorn’s analysis of Bitcoin supply based on the price at which each coin last moved reveals a sparse cost basis between the current price and a higher range. Long-term holders are in profit and likely waiting for even higher prices before selling.
Thorn’s Accurate Predictions
Last week, Thorn accurately predicted a gamma squeeze and highlighted the significant role of the options market in influencing Bitcoin’s price trajectory. He warned that gamma shorts were approaching max pain.
A Favorable Environment for Bitcoin Bulls
In summary, Thorn’s analysis provides a comprehensive overview of the current market dynamics. The potential for gamma squeezes, declining on-chain liquidity, and historical patterns all indicate a favorable environment for Bitcoin bulls.
At press time, BTC traded at $34,249.
Hot Take: Bitcoin Market Primed for Another Gamma Squeeze
Alex Thorn, head of firm wide research at Galaxy, believes that another Bitcoin gamma squeeze could occur, similar to what was witnessed last week. This potential squeeze is driven by options dealers who would need to buy spot BTC if prices rise further. Thorn’s analysis also highlights other factors such as declining on-chain liquidity and historical patterns resembling previous bull runs. These dynamics suggest a favorable environment for Bitcoin bulls. With BTC currently trading at $34,249, it will be interesting to see how these factors play out in the near future and whether another gamma squeeze materializes.
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