Bitcoin Earlier on Tuesday, Bitcoin prices surged above $75,000, driven by changing dynamics in the derivatives market.
The price hit a high of $75,800, convincingly breaking out of a long-term resistance corridor between $73,750 and $74,400, with the price trend reversing three times since 2024, according to CoinDesk data.
The so-called bullish breakout occurs when traders close bearish short positions initiated during the sell-off in early February.
Markus Thielen, founder of 10x Research, said in a note to clients: “Bitcoin’s recent moves have been driven primarily by put option selling around $55,000 and $60,000, as traders increasingly realize that these options are unlikely to expire with only a few days left. The unwinding of these downside hedges has contributed to the latest bullish price action.”
A put option is a derivatives contract that gives the right to sell an underlying asset (in this case, BTC) at a fixed price by a specific date. Put options are bought when traders think prices may fall or want to protect against losses. It’s basically insurance against price declines, while call options provide upside risk.
In early February, as Bitcoin plummeted, traders were aggressively buying put options at $60,000 and below, almost touching $60,000 on some exchanges. However, market sentiment has since stabilized, forcing traders to reassess their bearish positions.
The unwinding of these bearish bets also has a second-order bullish effect.
Thielen said: “The selling or closing of Bitcoin put options reduces downside hedging pressure, forcing market makers to buy Bitcoin to rebalance their exposure, thereby creating supportive flows that push prices higher.”
CoinDesk warned last week that the rally could accelerate as prices approach $75,000, largely due to anticipated hedging activity by market makers.
However, there has been no significant upside buying so far. Thielen explained that this suggests that the move so far has been driven more by hedging unwinding than aggressive bullish positioning.
Altcoins surge
Bitcoin’s gains have boosted the broader crypto market, with the CoinDesk 20 index rising 5% to 2,202 points in the past 24 hours.
Ethereum (ETH) rose nearly 8% to $2,360, benefiting from increased demand for call option bets. XRP (XRP) and solana (SOL) rose 8% and 4% respectively.
ZEC, PEPE, DOT and VIRTUAL were also strong performers.
