Market makers, the firms that take the other side when traders bet on where bitcoin BTC$66,834.89 and ether ETH$1,891.77 are headed, are hedging in a way that could make price swings bigger.
Options are contracts that let traders bet on a coin's price rising or falling. When a trader buys or sells an option, a market maker usually takes the other side of the trade, so there is nearly always someone to trade with and the market keeps running smoothly.
Market makers, also called dealers, are not trying to predict prices. They earn money from the small gap between their buying and selling prices and aim to avoid betting on direction. Price moves still expose them to direction, so they buy or sell coins, or futures tied to those coins, to offset that exposure. This brings them back to market-neutral, meaning they hold no directional bet. This is called hedging.
That hedging can either steady the market or amplify its swings, and right now it appears to be doing the latter. The reason lies in how market makers are positioned, measured by gamma exposure, or GEX. According to Greeks.Live, GEX is negative, or short, across the price range where bitcoin is currently trading.
As a result, they may sell coins or futures as prices fall to return their books to neutral, and buy them as prices rise for the same reason. Either way, their trading could exaggerate the move.
“Both Bitcoin and Ether have slipped into deep negative gamma territory,” Adam, a macro researcher at options platform Greeks.Live, told CoinDesk. “Deep negative GEX means dealers are net short options - largely driven by traders bidding up downside puts or chasing breakout calls. To stay hedged in a short-gamma regime, dealers must trade with the prevailing momentum, not against it.”
Puts are bets on a fall. Calls are bets on a rise.
Greeks.Live's GEX chart for bitcoin shows the picture. Each bar represents market makers' GEX at a price level. At 12:37 UTC on Saturday, with bitcoin near $67,191, the bars are red from about $58,000 to $72,000, with the largest concentrated near $68,000 and $70,000. No green bars sit below the current price, so nothing appears to cushion a drop until the area around the June low of $57,700.
