Matrixport Research: $2.5 Billion Gamma Liquidation Imminent, Liquidity Still Not Fully Restored Behind the Rebound

This week, Bitcoin’s price remained largely flat, but market structure is quietly changing. About $2.5 billion in short gamma exposure is approaching expiration, and since the high of $89,000, approximately $26.7 billion has flowed out of the market, with overall positions nearing a phased reset. The recent rapid dip and subsequent rebound were mainly driven by options position structures rather than fundamental improvements. As the gamma mechanism’s influence gradually diminishes, the dominant factor may shift from options hedging logic to liquidity itself.

Short Gamma Amplifies Volatility: Key Levels at $63,000 and $69,000–$70,000

The current decline and rebound largely stem from a short gamma structure. Market makers previously maintained short gamma positions, and during price declines, they were forced to sell futures to hedge exposure, amplifying the downward move and pushing prices toward $63,000. As risk appetite improves and tech stocks strengthen, sentiment recovers, leading to a linked rebound in the crypto market. Market makers in a short gamma state are forced to buy Bitcoin to hedge during price rises, further amplifying technical rebounds. However, the market’s fundamentals haven’t changed substantially this week; price volatility remains mainly driven by position structures and gamma factors.

Structurally, the $69,000–$70,000 range contains the largest negative gamma exposure, becoming a short-term “threshold.” If broken downward, convexity will be further amplified; if the price rebounds to this zone, it will likely encounter resistance from hedging positions. Until the related short gamma exposure matures and declines, the market may oscillate around this area.

With the approximately $2.5 billion short gamma exposure expiring on February 27, technical disturbances are expected to weaken. The market will gradually shift from a position-driven logic to one dominated by fundamentals and liquidity. However, current trading volume remains weak, and capital inflows are limited, indicating structural pressure has not yet eased.

Capital Outflows and Liquidity Constraints: Rebound as a “False Recovery”

Although short-term technical indicators show positive divergence relative to price, our baseline view remains: Bitcoin is still in a larger correction phase. The recent rebound is more likely part of consolidation rather than the start of a new sustained rally. The core issue remains: ongoing capital outflows continue to suppress the market. According to the 30-day actual capital flow indicator, since the $89,000 high, about $26.7 billion has exited the market. This exceeds the levels seen during the industry-wide risk event in July 2022.

Historical experience suggests that late-stage bear markets often see sharp counter-trend rebounds followed by further weakness. Before a sustainable bottom forms, the market typically undergoes multiple “false recoveries.” Although models indicate we are closer to a structural bottom, persistent capital outflows imply that the absolute low has likely not yet been confirmed.

More critically, liquidity conditions matter. In previous cycles, each clear rebound was almost always accompanied by significantly increased trading activity, with 24-hour trading volumes reaching at least $260 billion. Recently, the current rebound’s daily volume is only about $118 billion, more indicative of a temporary stabilization rather than a genuine sentiment recovery. Without substantial liquidity expansion, sustained rebounds are unlikely.

Overall, this week’s volatility was mainly driven by the amplification effect of the short gamma mechanism rather than fundamental improvements. As the $2.5 billion short gamma exposure gradually unwinds, technical disturbances may lessen in the short term. However, the key remains whether capital inflows and liquidity recovery can occur simultaneously. Until the $26.7 billion outflow since the peak is reversed, any rebound should be viewed as tactical trading opportunities rather than a structural trend reversal.

The above insights are from Matrix on Target. Contact us for the full Matrix on Target report.

Disclaimer: Markets carry risks; investments should be cautious. This article does not constitute investment advice. Digital asset trading can be highly risky and volatile. Investment decisions should be made after careful consideration of personal circumstances and consultation with financial professionals. Matrixport is not responsible for any investment decisions based on this information.