Matrixport Research: $2.5 Billion Gamma Liquidation Approaches, Liquidity Still Not Back in Place Behind the Rebound

This week, Bitcoin's price is overall close to flat, but the market structure is quietly changing. Approximately $2.5 billion in short gamma exposure is about to expire, and since the high of $89,000, around $26.7 billion has flowed out of the market, bringing overall positions close to a phase reset. The previous rapid decline followed by a rebound was driven more by the options position structure rather than an improvement in fundamentals. As the impact of the gamma mechanism gradually recedes, the dominant factor 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 due to the short gamma structure. Previously, market makers maintained short gamma positions and were forced to sell futures to hedge their exposure during the price decline, thus amplifying the downturn and accelerating the price towards $63,000. With improved risk appetite and a rally in tech stocks boosting sentiment, the crypto market experienced a correlated rebound. Market makers in a short gamma state were forced to buy Bitcoin for hedging as prices rose, further amplifying the technical rebound. However, there has been no substantial change in market fundamentals this week, and price fluctuations are still largely driven by position structure and gamma factors.

Structurally, the $69,000--$70,000 range has concentrated the largest scale of negative gamma exposure, becoming a short-term "threshold." Once breached, the downside convexity will be further amplified; conversely, when prices rebound to this range, they are likely to encounter resistance from hedging positions. Until the relevant short gamma exposure completes its expiration and recedes, the market may continue to oscillate around this area.

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

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

Although short-term technical indicators have shown positive divergence compared to prices, 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 start of a new sustained upward trend. The core issue remains unchanged: ongoing 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 high of $89,000. This scale has exceeded the levels seen during the industry-wide chain risk events in July 2022.

Historical experience shows that the late stage of a bear market often accompanies rapid counter-trend rebounds, followed by renewed weakness. Before a truly sustainable bottom is formed, the market typically undergoes multiple "false repairs." Although models indicate we are closer to a structural bottom, persistent capital outflows suggest that the absolute low is likely not yet confirmed.

More critically, liquidity conditions are essential. In this cycle, each clearly defined rebound has almost always been accompanied by a significant increase in trading activity, with 24-hour trading volumes reaching at least $260 billion. However, the recent rebound's daily trading volume is only about $118 billion, which is closer to a temporary stabilization of the market rather than a clear recovery in sentiment. Without substantial liquidity expansion, rebounds are often difficult to sustain.

Overall, this week's volatility is more driven by the short gamma mechanism rather than improvements in fundamentals. As the $2.5 billion short gamma exposure gradually recedes, the market will see a reduction in some technical disturbances in the short term, but the real key remains whether capital inflows and liquidity recovery can occur simultaneously. Until the cumulative $26.7 billion outflow since the peak is reversed, any rebound should be viewed as a tactical trading opportunity rather than a structural trend reversal.

The above views are partly derived from Matrix on Target. Contact us to obtain the complete report of Matrix on Target.

Disclaimer: The market carries risks, and investment should be approached with caution. This article does not constitute investment advice. Trading in digital assets may involve 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 herein.