BTC Gearing Up for the Next Bull Run as Pre-rally Patterns Emerge

Alex Thorn, the head of Firmwide Research, revealed in a series of X (formerly Twitter) posts yesterday that bullish narratives and positive fundamentals are emerging for Bitcoin (BTC). According to Thorn, the price of BTC could explode in the short term as a “gamma squeeze” has popped up.

the #bitcoin gamma squeeze from last week could happen again 👀

if BTCUSD moves higher to $35,750-36k, options dealers will need to buy $20m in spot BTC for every 1% upside move, which could cause explosiveness if we begin to move up towards those levels

more 👇 pic.twitter.com/OA9tJ0ZaK9

— Alex Thorn (@intangiblecoins) October 30, 2023

He anticipated that BTC could enter into a strong move soon if it climbs higher to between $35,750-$36K, as this will force options dealers to buy $20 million worth of BTC in the spot market for every 1% upside move. Thorn explained that dealers need to perform buy-spot trades to stay delta-neutral when the market does not go their way.

when dealers are short gamma and price moves up, or when they are long gamma and price moves down, they need to buy spot to stay delta neutral. last week’s expiries will dampen potential explosiveness, but it’s still in play.

compare today’s gamma profile to last week’s.… pic.twitter.com/ZZqTCrmxkJ

— Alex Thorn (@intangiblecoins) October 30, 2023

He did, however, reveal in another post that there has been a divergence between the supply of BTC held by long-term holders and the supply moved over the past 24 hours. According to Thorn, this is a sign of decreased on-chain liquidity.

Despite this diminishing liquidity, he maintained a bullish outlook given the 4-year rolling Z-score of the ratio of market price to realized price. Thorn noted that this metric reveals the early formation of a pattern that has preceded several prior bull runs. Subsequently, he speculated that BTC’s price may be in a healthy position structurally.

looking at the 4-year rolling Z-score of the ratio of market price to realized price (a variation of MVRV), we can see the beginning of a patern that has preceded several prior bull runs, suggesting that price is structurally in a healthy place and we are not overvalued given… pic.twitter.com/1AJ38ITLQ5

— Alex Thorn (@intangiblecoins) October 30, 2023

Long-term holders also seem to be waiting for higher prices before taking profits, given the fact that 70% of BTC’s supply has not moved in the past 1+ years. Furthermore, the compression of relative cost bases between short-term and long-term holders shows a tightening that is reminiscent of other bear/accumulation periods prior to bull markets.

At press time, BTC was up 0.14% and was trading hands at $34,317.59, according to CoinMarketCap. The market leader was also trending and occupied the 3rd position on CoinMarketCap’s trending list.

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