Bitcoin and XRP have been unusually calm lately, staying close to their usual price levels while the rest of the market waits for a breakout.
The sideways trading of Bitcoin (BTC) and XRP (XRP) is probably caused by an unseen force that keeps both cryptocurrencies fixed at important price points. The same “price magnets” could, however, increase the volatility of the ether (ETH) market. There could be a reason for the calm, and it’s not just because investors are being smart.
Ethereum, however, is about to make a very different, and maybe more dramatic, move.
Ethereum is moving into a negative gamma zone, where trades by market makers usually cause prices to change. This difference could make ETH very unstable, while BTC and XRP stay stable.
How do market makers influence crypto prices?
Market makers are organizations entrusted with generating liquidity in the order book of an exchange. These organizations profit from the bid-ask spread and are always on the other side of traders or investors, all the while attempting to keep their exposure price-neutral. Their futures and spot market hedging techniques frequently increase or decrease market volatility.
Deribit-listed options activity monitored by Amberdata indicates that options market makers are “long gamma” at strikes of $108,000 and $110,000 in the case of Bitcoin. According to the position, market makers own long options (puts and calls) that could profit from future volatility, as per a report.
What’s keeping Bitcoin and XRP stuck?
In order to keep the direction-neutral book, market makers are probably trading against market movements by buying low and selling high, which keeps Bitcoin pinned in the $108,000–$110,000 range. According to CoinDesk data, the price of Bitcoin has primarily fluctuated within the aforementioned range this month.
A sizable positive market maker gamma build up is seen at the $2.30 strike price in the XRP market, suggesting that a similar dynamic is at work there. In order to limit volatility, maker makers must buy low and sell high around that level.
Why is Ethereum more volatile than Bitcoin right now?
Early today, Ether, the native token of Ethereum and the second-largest cryptocurrency by market value, reached a high of $2,647, the highest since June 16.
Ether has entered a “negative market maker gamma” zone between $2,650 and $3,500 as a result of the move. Dealers who hold negative gamma have a tendency to trade in the market’s direction, which exacerbates bearish or bullish movements.
If everything else remains unchanged, their hedging activities could potentially amplify the bullish momentum of ether and heighten volatility.
Also read: SEI Enables Native USDC and Secure Cross-Chain Transfers
