Bitcoin OGs Selling Covered Calls is the Source of Sideways Market: Analyst

Lengthy-term Bitcoin (BTC) whales promoting coated calls, a technique of promoting name choices that give the purchaser the proper however not an obligation to buy an asset in the future at a predetermined worth in change for the vendor gathering a premium, is suppressing spot BTC costs, in response to market analyst Jeff Park.

Massive, long-term BTC holders, also referred to as “whales” or “OGs,” introduce a disproportionate quantity of sell-side stress by means of this coated name technique, partly as a result of market makers are on the different facet, shopping for the coated calls, Park said.

Because of this the market makers should hedge their publicity to purchase the calls by promoting spot BTC, forcing market costs down, regardless of robust demand from conventional exchange-traded fund (ETF) buyers.

As a result of the BTC used to underwrite the choices has been held for a very long time and doesn’t characterize new demand or recent liquidity, the calls act as a web downward stress on costs. Park stated:

“When you have already got the Bitcoin stock that you simply’ve had for 10-plus years that you simply promote calls towards it, it is solely the name promoting that is including recent delta to the market — and that route is destructive — you’re a web vendor of delta whenever you promote calls.” 

The evaluation concluded that Bitcoin’s worth is being steered by the options market and that worth motion will stay uneven so long as whales proceed to extract short-term income from their Bitcoin stash by promoting coated calls.