Bitcoin Rally Still Has Room to Run as Traders Exit Volatility Shorts

Bitcoin’s rebound may still have significant room to run as traders who positioned against volatility are forced to unwind their bets, potentially creating another wave of buying, according to Alexander Blume, founder and CEO of Two Prime.

Investors have repeatedly sold Bitcoin call options, keeping implied volatility suppressed and leaving those positions exposed to a sharp BTC rally. Blume said a continued rise in Bitcoin could force these traders to hedge their exposure or close their positions, adding further support to prices.

“There are still a meaningful number of people short,” Blume said, arguing that selling Bitcoin volatility at historically low levels has been a particularly risky strategy.

Bitcoin has regained ground in recent weeks, briefly climbing above $82,000 on Thursday to reach its highest level since May. BTC was trading near $78,500 at the time of publication.

The recovery initially benefited from lower bond yields, increased Treasury debt buybacks and expectations that the Federal Reserve might keep interest rates unchanged in September. Spot Bitcoin ETFs recorded $731 million in inflows Thursday, marking their strongest daily inflow since January. Stronger-than-expected jobs data released Friday, however, increased market expectations for a potential Fed rate hike.

Two Prime is a New York-based institutional Bitcoin asset manager and lender that serves corporate treasuries, miners, family offices and other investors. Founded in 2019, the firm says it has access to $3 billion in lending capacity.

Funding rates indicate limited leverage

Despite Bitcoin’s rapid advance, funding rates in perpetual futures have remained below levels typically associated with excessive leverage and market tops, Blume said.

That suggests the rally is not being driven mainly by speculative traders taking on large leveraged positions. Spot ETF demand and renewed buying from companies holding Bitcoin as a treasury asset are also contributing to the recovery.

Strategy and Strive have resumed purchasing BTC, potentially creating a feedback loop in which higher Bitcoin prices improve their ability to raise capital, enabling them to acquire additional coins.

Bitcoin’s implied volatility dropped to about 23%-24% last month before rising into the 40% range during the rally, Blume said. Although volatility has increased substantially, it remains relatively moderate compared with Bitcoin’s historical levels. Another rise could place greater pressure on traders who sold calls to hedge or exit their positions.

Bitcoin could find support near $60,000

Blume believes Bitcoin has built a potential floor around $60,000, assuming broader economic conditions remain stable.

A widespread selloff in stocks and other risk assets would pose the biggest threat to that support. “If there is a broader collapse in risk assets, bitcoin will fall as well,” he said.

High Treasury yields, elevated oil prices and persistent inflation remain challenges for the market. However, Blume said the large amount of bearish positioning could make Bitcoin particularly sensitive to even modestly positive economic developments.

He expects the Trump administration to focus on economic stability while supporting lower interest rates.

Blume also pointed to planned changes to portions of the personal consumption expenditures price index, saying the adjustments could lead to lower reported inflation and improve expectations for a shift toward easier monetary policy.

Miners increasingly use BTC to raise capital

The stronger crypto market is also supporting Two Prime’s lending business, with Blume noting that demand for financing tends to rise alongside Bitcoin prices.

Bitcoin miners are meanwhile taking different approaches to the industry’s expansion into artificial intelligence. Cipher Mining and TeraWulf have moved aggressively into AI infrastructure, while CleanSpark and MARA are attempting to maintain their Bitcoin operations while also expanding into AI and power infrastructure.

MARA sold more than 23,000 BTC during the first half of the year but has since turned to borrowing against its remaining Bitcoin rather than selling additional holdings. In August, the company secured $600 million from Coinbase and Two Prime.

The deal illustrates how major miners can unlock liquidity from their Bitcoin reserves without giving up their exposure to potential future gains in BTC, Blume said.