This week, the price of Bitcoin is overall close to flat, but the market structure is quietly changing. Approximately $2.5 billion in short gamma exposure is about to clear, and about $26.7 billion has flowed out of the market since the high of $89,000, with overall positions approaching a phase reset. The previous rapid decline and subsequent rebound were driven more by the structure of options positions rather than any fundamental improvements. As the influence of the gamma mechanism gradually recedes, the dominant factors may shift from options hedging logic to liquidity itself.

Short Gamma Amplifies Volatility: $63,000 and $69,000–70,000 as Key Ranges

This round of decline and rebound is largely attributed to the short gamma structure. Previously, market makers maintained short gamma positions and were forced to sell futures to hedge exposure during the price decline, thus amplifying the drop and accelerating the price towards $63,000. With an improvement in risk appetite and a strong performance in tech stocks driving sentiment recovery, the crypto market experienced a correlated rebound. Market makers in a short gamma state are forced to buy Bitcoin to hedge during the price recovery, further amplifying the technical rebound. However, there has not been any substantial change in the fundamentals of the market this week; price fluctuations are still primarily driven by position structure and gamma factors.

Structurally, the $69,000–70,000 range is concentrated with the largest scale of negative gamma exposure, becoming a short-term "threshold." Once breached, downside convexity will be further amplified; conversely, when the price rebounds and approaches this range, it is likely to face resistance from hedging positions. Until the relevant short gamma exposure completes its expiration and declines, the market may still experience repeated oscillations near this area.

As approximately $2.5 billion in short gamma exposure clears on February 27, technical disturbances are expected to weaken. Going forward, the market will gradually transition from position-driven logic to trends dominated by fundamentals and liquidity. However, the current weak trading volume and limited capital inflows indicate that structural pressure has not yet been alleviated.

Capital Outflow and Liquidity Constraints: The Rebound Looks More Like a "False Repair"

Although short-term technical indicators have shown positive divergence relative to the price, our baseline judgment remains: Bitcoin is still in a larger correction phase, and the recent rebound is more likely part of a consolidation rather than the starting point of a new sustained upward movement. The core issue remains unchanged: persistent capital outflows continue to suppress the market. According to the 30-day actual capital flow indicator, approximately $26.7 billion has flowed out of the market since the peak of $89,000. This amount has surpassed levels observed during the chain risk events in July 2022.

Historical experience shows that late in a bear market, there is often a rapid countertrend rebound followed by another decline. Before a truly sustainable bottom is formed, the market typically experiences multiple "false repairs." Although models indicate that we are closer to a structural bottom, the ongoing capital outflows suggest that an absolute low point has not likely been confirmed yet.

More critically, liquidity conditions play a significant role. In this cycle, each clearly defined rebound has almost always been accompanied by a notable increase in trading activity, with a 24-hour trading volume of at least $260 billion. However, the recent rebound's daily trading volume is only about $118 billion, which is more indicative of the market temporarily stabilizing rather than a clear warming of sentiment. If there is a lack of substantial liquidity expansion, rebounds are often hard to sustain.

Overall, this week's volatility is more driven by the short gamma mechanism rather than fundamental improvements. As $2.5 billion in short gamma exposure gradually recedes, the market is expected to reduce some technical disturbances in the short term, but the real key still lies in whether capital inflows and liquidity recovery can synchronize. As $26.7 billion in capital outflows continue to accumulate from the peak, any rebounds should be viewed more as tactical trading opportunities rather than structural trend reversals.

The above points are partially drawn from Matrix on Target, Contact Us for the full report on Matrix on Target.

Disclaimer: The market has risks, and investment should be cautious. This article does not constitute investment advice. Digital asset trading can have significant risks and volatility. Investment decisions should be made after careful consideration of personal circumstances and consultation with financial professionals. Matrixport is not responsible for any investment decisions made based on the information provided in this content.

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