Bitcoin surged past $75,000 early Tuesday, helped by changing dynamics in the derivatives market.
Prices hit a high of $75,800, convincingly topping the long-term resistance corridor between $73,750 and $74,400, reversing price trends three times since 2024, according to CoinDesk data.
The so-called bullish breakout happened when traders closed out bearish short positions initiated at the beginning of the February selloff.
“In bitcoin, the recent move has been mainly driven by a significant sell-off around the $55,000 and $60,000 strike as traders increasingly recognized that these options were unlikely to expire in the money with only days to go. The unwinding of these downside hedges has contributed to the recent bullish price action,” said Markus Thielen, founder of a 10x client, Research.
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 may fall or when they want protection against losses. It is basically insurance against price declines, while a call option provides upside exposure.
Traders aggressively bought put options at $60,000 and lower levels in early February as bitcoin crashed and nearly hit $60,000 on some exchanges. However, since then market sentiment has stabilized, forcing traders to reassess their bearish position.
The settlement of these bearish bets also has second-order bullish effects.
“The sale or closing of Bitcoin put options reduces the downside of the hedging pressure and forces market makers to buy BTC to rebalance their exposure, creating supportive flows that can push prices higher,” Thielen said.
CoinDesk warned last week that the rally could accelerate as prices approach $75,000, largely due to expected hedging activities by market makers.
So far, however, there has not been a significant upside call purchase. This suggests that the move so far has been driven more by hedge unwinds than by aggressive bullish positioning, Thielen explained.
Altcoins are rising
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.
Ether (ETH) is up nearly 8% to $2,360, helped by increasing demand for bullish option bets. XRP (XRP) and solana (SOL) are up 8% and 4% respectively.
ZEC, PEPE, DOT and VIRTUAL are other outstanding artists.
