President Donald Trump’s renewed aggressive stance toward Iran has sent Bitcoin down about 2% to $67,000 in the past 24 hours. While this price action is consistent with regular moves, beneath the surface, the market structure looks fragile.
This is primarily due to liquidity in the Deribit-listed options market, specifically the accumulation of defensive positions just below current prices, which could lead to a slide all the way to $50,000.
Fragile setup for under $68,000
In recent weeks, traders have been buying put options that offer downside protection. These defensive flows have concentrated on puts with strike prices of $68,000 and below, all the way down to around $55,000. This is understandable given the macroeconomic risks posed by the Iran war, the quantum threat and the brutal bear market that began late last year.
However, when such a position is established, it creates what savvy traders call a “negative gamma” zone – a situation where market makers or traders who add liquidity to the exchange’s order book are forced to react to price movements, ultimately accelerating the current trend, which in this case is bearish.
In the past, such dynamics have amplified both bullish and bearish trends.
The Glassnode chart shows that dealer gamma exposure is mostly negative, from $68,000 to $50,000. This is the result of traders taking a long put option position on the other side.
In other words, traders take a short bearish position. Therefore, when the market falls below $68,000, they will face losses and may short BTC to hedge the risk.
This hedging can drive prices even lower, creating a feedback loop that can quickly accelerate.
This is why the recent dip below the $68,000 level becomes crucial. A move below this threshold not only signals technical weakness but also opens the door to an area where forced selling could intensify.
“Negative gamma is currently trading just below current price levels, from $68,000 all the way down to the mid-$50s,” Glassnode said in its weekly report.
The firm added: “Entering this area could trigger an accelerated sell-off as hedging flows increase downside momentum, turning an otherwise gradual move into a more dramatic repricing and potentially re-testing the $60,000 level, the bottom of the February 5 sell-off.”
With liquidity remaining relatively thin after the March 27 options expiry, and likely to remain thin through the Easter holidays, there may not be enough buyers to absorb the pressure.
Therefore, if the feedback loop fully kicks in, the drop could be well below $60,000.
This setup suggests that while Bitcoin is currently reacting to war headlines, the inner workings of the market can also shape its trajectory.
If the price remains above $68,000, the current setup may lift without much damage. But a sustained break below that level could tip the market into a self-fueled sell-off, turning regular declines into deeper volatility.
