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Bitcoin’s ascent, driven by the unwinding of short positions, has elevated the overall cryptocurrency market, with the CoinDesk 20 Index increasing by 5%.
BTC‘s price rally. (CoinDesk)
What to know:
- Bitcoin rose above $75,000, reaching a peak of $75,800, surpassing a persistent resistance level that had limited price increases multiple times this year.
- The recent increase is primarily influenced by traders unwinding bearish put-option hedges around the $55,000 to $60,000 range, with subsequent bullish effects adding to the momentum.
- Bitcoin’s ascent has boosted the overall cryptocurrency market, with the CoinDesk 20 Index climbing 5% and significant altcoins like ether, XRP, and solana also experiencing notable gains.
Bitcoin climbed past $75,000 early Tuesday, aided by changing conditions in the derivatives market.
Prices reached a maximum of $75,800, convincingly breaching the long-standing resistance zone between $73,750 and $74,400, which had reversed price trends three times since 2024, according to CoinDesk data.
This so-called bullish breakout occurred as traders closed bearish short positions established during the early February decline.
“In Bitcoin, the recent movement has been largely propelled by significant put selling around the $55,000 and $60,000 strikes, as traders increasingly understood that these options were unlikely to expire in the money with only a few days left. The unwinding of these downside hedges has contributed to the latest bullish price movement,” Markus Thielen, founder of 10x Research, noted in a communication to clients.
A put option is a derivative agreement that provides the right to sell the underlying asset, in this case, BTC, at a predetermined price prior to a specified date. Traders purchase puts when they anticipate a price drop or seek protection against losses. It essentially acts as insurance against price declines, while a call option allows for potential upside exposure.
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Traders aggressively acquired put options at $60,000 and lower levels in early February as Bitcoin plummeted, nearly reaching $60,000 on some platforms. Nevertheless, since then, market sentiment has stabilized, prompting traders to reevaluate their bearish positions.
The unwinding of these bearish positions also has secondary bullish implications.
“The selling or closing of Bitcoin put options alleviates downside hedging pressure and compels market makers to buy BTC to rebalance their exposure, resulting in supportive flows that can elevate prices,” Thielen explained.
CoinDesk cautioned last week that the rally could gain momentum as prices approach $75,000, primarily due to anticipated hedging activities from market makers.
However, there has yet to be a significant increase in upside call buying. This indicates that the movement has largely been fueled by hedge unwinds rather than aggressive bullish positioning, Thielen clarified.
Altcoins surge
Bitcoin’s increase has propelled the wider cryptocurrency market, with the CoinDesk 20 Index rising 5% to 2,202 points in the last 24 hours.
Ether (ETH) has advanced nearly 8% to $2,360, supported by rising interest in bullish options strategies. XRP (XRP) and solana (SOL) have risen 8% and 4%, respectively.
ZEC, PEPE, DOT, and VIRTUAL are among the other notable performers.
