I noticed an interesting thing when analyzing the Bitcoin decline chart in early February. Everyone talks about macroeconomics and capitulation of spot-ETF holders, but there is another force that usually operates in the shadows and provides liquidity to the market. This time, it played the role of an accelerator for the crash.

From February 4 to 7, Bitcoin dropped from $77,000 almost down to $60,000. It wasn’t just a smooth decline, but a sharp break. Besides macro factors and fund sales, market makers in the options market played a role here. They hedged their positions, and their actions only intensified the fall, creating a kind of self-sustaining cycle.

How does this work? Market makers are essentially dealers who constantly place buy and sell orders, earning on the spread between bid and ask. They are always on the opposite side of your trade and do not take on directional risk. Instead, they hedge their exposure through derivatives or the spot market.

In February, options market makers found themselves in a "short gamma" position in the range from $60,000 to $75,000. This means they had many short options at these levels without adequate hedging. When Bitcoin started falling, this position became increasingly vulnerable.

According to Marcus Thelen from 10x Research, when the price broke through the $75,000 level, market makers began actively selling BTC on the spot and futures markets to rebalance their hedges and return to a neutral position. But here’s the catch: their sales only increased downward pressure, causing them to sell even more. It created a vicious cycle.

Thelen noted that approximately $1.5 billion of negative gamma in the $75,000-$60,000 range played a key role in accelerating the decline. This is no coincidence. When market makers are forced to hedge in the same direction as the price movement, they become amplifiers of volatility rather than its dampers.

Interestingly, after the price broke through the $60,000 level and absorbed the last large gamma cluster, the market sharply recovered. This confirms that gamma mechanics were indeed one of the main drivers of the fall. Once the most vulnerable level was passed, the pressure eased.

An important point: this doesn’t mean market makers always work against you. At the end of 2023, they were in a similar position above the $36,000 level. When the spot price exceeded that level, market makers bought BTC to rebalance, which helped the rapid rise above $40,000. So, gamma mechanics can work both ways.

Currently, the BTC price is around $71,500. If you follow the market, it makes sense to pay attention not only to macro factors and news but also to the positions of market makers in the options market. They can give clues about where volatility might emerge soon. This is already becoming a standard analysis tool for those who understand derivatives market mechanics.