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In early August, we argued that Bitcoin would confirm its cycle low that month. It did. BTC pinned near 63,000 for weeks, then broke higher and hasn't looked back. The setup has shifted again. Implied vol is back near cycle lows while realized vol runs 12 points higher, and some Bitcoin options are now priced at 30 vol on a market moving at 42.
Dealers are short gamma just above spot, and $12bn of options expire in October. Positioning like this does not last long. This week we lay out two defined-risk option trades with 3.5-to-1 payoffs, plus the exact levels where dealer hedging speeds the move up and where it stops it.
Put demand has jumped over the past few days. The question is whether that is a short-term hedge or the start of a regime shift. In July, the smartest option traders positioned for a rally that caught most of the market off guard. Below, we show how that same money is positioned for the next move.
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