Bitcoin Price Poised For Another Surge Like Last Week: Here’s Why
October 30 2023 - 5:00AM
NEWSBTC
In a recent statement via X (formerly Twitter), Alex Thorn, head of
firm wide research at digital asset firm Galaxy, highlighted the
potential for another Bitcoin gamma squeeze similar to the one
witnessed last week. BTC gained 15% last week. He remarked, “The
Bitcoin gamma squeeze from last week could happen again. If BTCUSD
moves higher to $35,750-36k, options dealers will need to buy $20m
in spot BTC for every 1% upside move, which could cause
explosiveness if we begin to move up towards those levels.”
Elaborating on the mechanics, Thorn explained the behavior of
dealers in relation to gamma and delta. “When dealers are short
gamma and price moves up, or when they are long gamma and price
moves down, they need to buy spot to stay delta neutral. Last
week’s expiries will dampen potential explosiveness, but it’s still
in play.” This essentially means that the actions of options
dealers, driven by the need to maintain a neutral position, can
amplify price movements. Will Bitcoin Price Rally Like Last Week?
Thorn also emphasized the importance of on-chain data in
understanding these dynamics. He mentioned a continued divergence
between the supply held by long-term holders and the supply that
has moved in less than 24 hours. This divergence, which has been
growing over the past year, indicates a decline in on-chain
liquidity, suggesting that long-term holders are not selling their
holdings, potentially leading to a supply squeeze. Related Reading:
Bitcoin Season: Leading The Charge In The Crypto Market
Furthermore, Thorn pointed to the 4-year rolling Z-score of the
ratio of market price to realized price, a variation of the MVRV
ratio. This metric provides insights into Bitcoin’s valuation
relative to its historical average. A high positive Z-score
indicates potential overvaluation, while a negative Z-score might
suggest undervaluation. Thorn’s observation that the pattern is
beginning to resemble those seen before previous bull runs is
particularly noteworthy. Another crucial observation made by Thorn
pertains to the compression of relative cost bases. He noted a
tightening pattern that has historically been observed during bear
or accumulation periods that precede bull markets. This compression
suggests that there is a consensus among different types of holders
about the value of Bitcoin. Related Reading: The Hidden Signals:
Bitcoin’s On-Chain Data Points To Bullish Outlook, But There’s A
Catch Thorn’s analysis of the Bitcoin supply by the price at which
each coin last moved is particularly illuminating. He observed a
sparse cost basis between the current price of $34,591 and the
$38,400-39,100 range. Moreover, with 83% of the supply not having
moved since prices were lower than today and nearly 70% of the
supply stagnant for over a year, it’s evident that long-term
holders are in profit and are likely waiting for even higher prices
before selling. Last week, as reported by NewsBTC, Thorn had
accurately predicted a gamma squeeze. He had emphasized the
significant role the options market played in influencing Bitcoin’s
price trajectory. Thorn warned, “We are approaching max pain for
gamma shorts.” In summary, while Thorn does not make a direct
prediction about Bitcoin’s near-term price, his analysis on X
provides a comprehensive overview of the current market dynamics.
The combination of potential gamma squeezes, declining on-chain
liquidity, and historical patterns all point towards a favorable
environment for Bitcoin bulls. At press time, BTC traded at
$34,249. Featured image from Shutterstock, chart from
TradingView.com
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