Geopolitical Risks and Hidden Dangers in the Options Market
President Donald Trump once again threatened further military actions against Iran, sending geopolitical risks soaring and dragging Bitcoin to around $66,800. On the surface, this appears to be routine market volatility. However, a closer look at derivatives market structure reveals deeper risks. On Deribit, traders have been aggressively buying put options (protective puts) with strike prices concentrated below $68K, extending down to $55K. This defensive positioning creates a dangerous buildup.
Negative Gamma Zone: How Market Makers Amplify the Downside
When put option positions become overly concentrated, the market enters a negative gamma zone. Glassnode data shows that from $68K down to $50K, market makers' gamma exposure is almost entirely negative. Because traders have bought many puts, market makers are short those puts (Short Put). If Bitcoin breaks below $68K, marker makers face losses and must short Bitcoin to hedge. This selling pressure pushes prices lower, creating a self-reinforcing loop of 'price drop – shorting – further drop'. Such dynamics have historically amplified both bull and bear moves.
The $68K Line and Liquidity Risks
Hence, $68K becomes a critical technical and psychological level. A breakdown not only signals technical weakness but also activates the negative gamma zone, where hedging flows intensify the downward momentum. Glassnode's latest weekly report notes that the negative gamma area is forming right below the current price, stretching from $68K to above $50K. Once price enters this region, it could trigger a sharp repricing, potentially revisiting the $60K bottom seen on February 5. Compounding the situation, after a large options expiry on March 27, market liquidity remains thin, and the Easter holiday further dampens trading activity. With insufficient buyers to absorb the selling pressure, a breach of $68K could quickly lead to a drop through $60K. In summary, if Bitcoin can reclaim and hold $68K, the option bomb may defuse over time. But if that line is broken, the vicious cycle of selling begetting more selling could transform a normal retracement into a deep crash.