Bitcoin surged past $75,000 early Tuesday, helped by shifting dynamics in the derivatives market. “In bitcoin, the recent move has been driven largely by sizeable put selling around the $55,000 and $60,000 strikes, as traders increasingly recognized that these options were unlikely to expire in the money with only days remaining. The unwinding of these downside hedges has contributed to the latest bullish price action,” Markus Thielen, founder of 10x Research. Bitcoin’s rally has lifted the broader crypto market, with the CoinDesk 20 Index gaining 5% to 2,202 points over the past 24 hours.
A put option is a derivative contract that gives the right to sell the underlying asset, in this case, BTC, at a fixed price before a certain date. Traders buy puts when they think the price might fall or when they want protection against losses. Traders aggressively bought put options at $60,000 and lower levels in early February as bitcoin crashed, nearly hitting the $60,000 on some exchanges. However, since then, market sentiment has stabilised, forcing traders to reassess their bearish positions.
The unwinding of these bearish bets also has second-order bullish effects. “The selling or closing of Bitcoin put options reduces downside hedging pressure and forces market makers to buy BTC to rebalance their exposure, creating supportive flows that can push prices higher,” Thielen said. So far, however, there has not been a significant upside call buying. This suggests the move has so far been driven more by hedge unwinds than by aggressive bullish positioning, Thielen explained.
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