Invisible Hands Behind Bitcoin's Volatility: How Market Makers Amplify Price Swings During Market Turmoil

Bitcoin is taking a hit as geopolitical tensions escalate over trade disputes, but there’s a more complex story playing out beneath the surface. While headlines focus on political friction, an invisible hand is working in the markets—and it’s making price moves even more dramatic. This invisible hand belongs to market makers, the entities that quietly orchestrate buy and sell orders on exchanges to keep trading frictionless. Understanding how these invisible hands operate reveals why Bitcoin and other major cryptocurrencies are swinging harder than you might expect.

The Surface Story: Tariffs and Risk-Off Sentiment

President Trump’s renewed tariff threats against Europe over Greenland have sent shockwaves through risk assets. Bitcoin has slipped to $78.1K, down 3.75% over the past 24 hours, while Ethereum sits at $2.36K, declining 6.48% in the same period. The CoinDesk 20 index is also feeling the pressure, mirroring weakness across Nasdaq 100 futures as investors flee to safer assets.

“Much of the tension is coming from political noise,” said Emir Ibrahim, an analyst at trading firm Zerocap. The threats span military intervention in Venezuela, tariff proposals toward Iran, and efforts to challenge Federal Reserve Chair Powell. A potential Supreme Court ruling against Trump’s tariff policies could create additional near-term volatility, according to Ibrahim’s analysis.

Traditional markets are reflecting this broad-based weakness. The U.S. 10-year yield has climbed to 4.289%, the dollar is under pressure, and stock futures are pointing lower. This macro backdrop certainly explains part of Bitcoin’s decline, but it’s not the whole story.

The Invisible Hands at Work: How Gamma Exposure Drives Volatility

Behind the scenes, market makers in Bitcoin’s options market are facing a critical challenge. These invisible hands are the backbone of liquid markets—they create the bid-ask spreads that allow large trades to execute at stable prices. But in volatile environments, these invisible hands can inadvertently amplify price swings.

Here’s how it works: Market makers earn money from the bid-ask spread between buy and sell orders. To stay profitable, they must constantly hedge their exposure to price movements—a process called gamma exposure hedging. When Bitcoin’s price moves up or down, market makers adjust their positions to keep their overall risk neutral.

The problem emerges when market makers hold negative gamma exposure across a wide price range. According to data from derivatives exchange Deribit tracked by Amberdata, Bitcoin’s options market is currently showing predominantly negative gamma exposure between $86,000 and $95,000. This is where the invisible hands become visible in their market impact.

Negative Gamma: When the Invisible Hands Amplify, Not Dampen

With negative gamma exposure, market makers’ hedging strategies work in the opposite direction of what you’d expect from natural price stability. As Bitcoin rises, they must buy more to hedge their positions—pushing prices up further. As Bitcoin falls, they must sell to rebalance—pushing prices down harder. This creates a feedback loop where the invisible hands of market makers actively amplify price swings rather than absorb them.

This dynamic is particularly powerful during times of uncertainty. “Their risk increases as the price changes, so they buy into strength and sell into weakness to hedge their positions, amplifying the price swings,” is how the mechanism breaks down. A similar pattern occurred in S&P 500 options markets in October, demonstrating that these invisible hands can operate across multiple asset classes.

The positive gamma zone at the $90,000 level provides some relief—there, market makers would do the opposite, actually helping to arrest volatility by buying weakness and selling strength. But the predominant negative gamma across most of the current trading range means the invisible hands are working against stability.

What This Means for Bitcoin Traders

The combination of political uncertainty and these invisible market-maker dynamics creates a potentially volatile setup. Bitcoin options traders are pricing in approximately a 30% chance of prices falling below $80,000 by late June, with notable put interest clustered at the $75,000-$80,000 level, according to options market data.

The takeaway is clear: the invisible hands of market makers aren’t villains—they provide essential liquidity—but their hedging behavior during negative gamma periods can turn moderate price pressure into sharp moves. When combined with macro headwinds like tariff threats, these invisible hands can significantly amplify market volatility.

Market Snapshot: Broad Weakness Across Assets

The pressure isn’t limited to Bitcoin. Ethereum is down over 6%, and the broader crypto market is showing red across the board. In traditional markets, we’re seeing similar pain: S&P 500 E-mini futures are down 1.60%, Nasdaq-100 futures are down 1.94%, and Dow Jones futures are down 1.46%.

Bitcoin dominance remains stable at 59.79%, suggesting the weakness is broad-based rather than an altcoin rotation. ETF flows tell an interesting story: spot Bitcoin ETFs saw outflows of $394.7 million, while spot Ethereum ETFs attracted $4.7 million in inflows. Cumulative spot Bitcoin ETF holdings stand at approximately 1.31 million BTC, while Ethereum ETF holdings total 6.23 million ETH.

Key Events and Announcements Ahead

Several important developments are scheduled for the coming days that could influence these invisible hand dynamics:

• Jan. 20: BNB Chain hosts an X Spaces session with DeFi protocols including PancakeSwap, Lista DAO, Venus Protocol, and United Stables
• Jan. 20: Avalanche announces a “major Avalanche announcement” during its AVAX Talk
• Jan. 20: MegaETH (MEGA) and Zama (ZAMA) token generation events occur
• Jan. 20: EtherFi hosts its first 2026 analyst call discussing the year’s plans
• Ongoing: Web3 Hub Davos (Day 2 of 4) continues in Switzerland

The invisible hands of market makers will be watching these events closely, as any major announcements could shift gamma exposure dynamics and influence the balance between volatility amplification and damping.

The Bottom Line: Understanding the Invisible Hands

Bitcoin’s current weakness stems from multiple sources: geopolitical tension, macro headwinds, and hawkish interest rate expectations. But the invisible hands of market makers—currently holding negative gamma exposure—are amplifying these moves. This is why Bitcoin’s 3.75% decline came alongside sharp moves in equities and broader risk-off sentiment.

The invisible hands aren’t disappearing anytime soon. As long as derivatives markets remain a significant part of the crypto ecosystem, these market-making dynamics will influence price action. Understanding them helps traders and investors better navigate the volatility ahead. When political uncertainty meets negative gamma exposure, the invisible hands are rarely gentle with price stability.