Bitcoin’s Wild Ride: Surviving a Storm of Tariffs and Volatility
Introduction: Volatility Shakes the Market
Bitcoin has experienced a week of wild swings, with sharp downward and upward movements testing traders’ nerves. Early in the week, a deep seek move pushed BTC down to $90,000, only for the market to rebound sharply within hours. Yesterday, news about tariffs proposed by Donald Trump once again brought uncertainty, causing BTC to dip back to $90,000, before recovering just as quickly.
This market is entering a phase of heightened volatility, with sharp spikes followed by rapid compressions. One of the most notable changes has been the gamma behavior in the SPX market. Unlike 2024, where market makers often bought on dips and sold on rallies, this year they are behaving differently, now selling as the market drops and buying as the market rises.
This phenomenon can be explained by the presence of negative gamma in the market makers’ books. When gamma is negative, market makers are forced to dynamically hedge their positions by selling as prices decline and buying as prices rise, amplifying market volatility.
In addition, factors such as charm and vanna further intensify this behavior:
These dynamics, combined with the current high-volatility environment, create a feedback loop where hedging activity becomes more extreme, exacerbating both upward and downward moves in the market.
Ranges have widened significantly, and Bitcoin is diverging from the SPX, with their correlation dropping to 0.56. On-chain metrics such as BTC Supply in Profit and Loss and NUPL (Net Unrealized Profit/Loss) suggest that sellers are becoming more active near key psychological levels like $100,000, while long-term holders remain in profit.
Strategy Performance Analysis
Here’s the performance analysis for the two strategies introduced last week:
Analysis:
The premium has increased from 608 USDT to 773 USDT, resulting in a loss of 165 USDT (27.1%) for the seller. BTC hovering near the short strike of $97,000 has increased the value of the spread, reflecting a more bearish sentiment.
Impact Total:
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Skew Analysis
Short-term skews (7 days) remain heavily tilted toward put protection, reflecting fears of downside risk. Skews narrow slightly for longer maturities, showing a gradual normalization in market sentiment.
Reflection on Current Positions
The Bull Put Spread, being a bullish strategy, has lost 165 USDT (27.1%) due to BTC trading near the short strike of $97,000. If BTC remains above this level by expiration, the strategy will still yield its maximum profit.
Key reminder: This week is expiration week, and if the spread achieves 20-25% of maximum profit, it is advisable to exit early, as we are trading both volatility and direction.
The Iron Condor, a strategy designed for lateral markets, has performed as expected, generating a gain of 184 USDT (10.8%). With the market range intact, the position is close to hitting the profit target. Exiting at this point would lock in gains while avoiding risks from potential market swings.
Key Takeaways
2025 is shaping up to be a year of rapid and exaggerated moves, both to the upside and downside. In such an environment, buy-and-hold strategies may not be the most effective approach.
This highlights the importance of learning to trade options, as they provide the flexibility and opportunities needed to navigate volatile markets. When combined with a long-term holding strategy for BTC, options trading could be a key factor in outperforming the market this year.
About Author
SpreadGreg is a distinguished Principal Trader and CEO at GP Asset Management LLC in Chicago, with over 11 years of professional trading experience and specialized in financial options and commodity futures strategies, he combines technical skill with strategic insight.