The US-Iran war remains uncertain and continues to impact markets. Bitcoin (BTC) surged above $70,000 yesterday after US President Donald Trump hinted at a possible ceasefire. However, this rise was short-lived.
While this decline is attributed to increased market volatility ahead of Trump’s negotiation deadline with Iran, Bitfinex analysts analyzed the latest situation in BTC.
Bitfinex analysts have warned that while Bitcoin’s recent spot price movement has been calm, this could mask increasing downside risks in the derivatives market.
The report stated that Bitcoin was trading between $64,000 and $74,000, while downside risks were accumulating in the derivatives market.
At this point, analysts drew particular attention to the ‘negative gamma environment’ that formed below $68,000, noting that this could lead to a chain reaction of sell-offs should a price drop occur.
This pattern suggests that Bitcoin could experience an accelerated decline towards the $60,000 level if its key support levels are broken.
Analysts stated that the negative gamma environment indicates a situation where market makers who sold put options to hedge against price declines may be forced to sell more Bitcoin to mitigate their risks.
“This dynamic, which has formed below $68,000, means that even a slight drop could turn into a steeper downward movement.”
As prices fall, hedging sales could create additional downward pressure.
In conclusion, Bitfinex analysts stated that Bitcoin’s recent calm indicates a temporary equilibrium rather than a stable upward momentum.
According to analysts, given the structure of the derivatives market, downward volatility is likely to increase.
*This is not investment advice.