Bitcoin May Stay Near $100K as Market Makers Manage Risks of a Pullback in the Overheated Market.

Hedging Activity Keeps Bitcoin Stable Around $100K Amid Elevated Funding Rates and Pullback Risks

Bitcoin (BTC) and the broader cryptocurrency market are seeing significant demand for bullish leveraged positions, which signals the market is becoming overheated. While hedging by market makers is likely to keep Bitcoin supported around the $100,000 level, this increased activity raises the risk of pullbacks, particularly for other cryptocurrencies.

Bitcoin, the largest cryptocurrency by market cap, reached a new all-time high above $103,000 early Thursday following President-elect Donald Trump’s decision to appoint Paul Atkins, a pro-crypto advocate, as the new chairman of the U.S. Securities and Exchange Commission (SEC). The announcement triggered a buying spree among traders, pushing funding rates for perpetual futures upward—a clear indication of growing demand for long positions and an overcrowded market. In such conditions, a small price correction could lead to significant liquidations (forced selling by exchanges due to margin shortages), increasing downside volatility.

According to Griffin Ardern, head of options trading and research at crypto financial platform BloFin, the options market may offer some support. When the price of options rises faster than the underlying asset, creating a positive gamma imbalance, market makers tend to sell their positions to neutralize their exposure. Conversely, when the imbalance is negative, they purchase the asset to counterbalance price movements, thus limiting large swings.

“Bitcoin could remain stable around $100,000 in the short term due to the hedging activities of market makers,” Ardern said in an interview with CoinDesk. “This support from the options market may help offset the potential impact of deleveraging, at least to some extent.”

Bitcoin’s annualized funding rate has surged to nearly 100%, surpassing rates for highly speculative coins like Dogecoin (DOGE), according to data from VeloData. Other cryptocurrencies, including XRP, CRO, and XMR, are also seeing funding rates above 100%.

Felix Hartmann, founder of Hartmann Capital, suggested that recent price movements may be largely driven by leverage. “The EOD [volume-weighted average price] shows Saylor spent billions, and the funding rates suggest this last move was likely lever-driven,” Hartmann commented, referring to Michael Saylor, executive chairman of MicroStrategy, the largest publicly traded holder of Bitcoin. “I wouldn’t be surprised by a 20-30% correction here. The 80s are definitely within reach.”

Hartmann highlighted the importance of sustained demand beyond institutional purchases to keep the bullish momentum going, a sentiment echoed by many market observers. They believe the market will either continue to rally, validating the cost of holding leveraged positions, or experience a sharp correction.

Even with market makers’ efforts to stabilize Bitcoin, volatility may return as the year comes to a close.

“The positive gamma at $105,000 on options expiring December 27 could provide enough support to stabilize prices, but once those options expire, the support will dissipate, potentially leading to greater price uncertainty,” Ardern explained.

Options are derivative contracts that grant the buyer the right—but not the obligation—to buy or sell the underlying asset at a predetermined price at a future date. A call option allows the buyer to purchase the asset, while a put option allows the buyer to sell it.