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BitMEX Founder: BTC at $20,000 and ETH at $1,000 Are Key Levels, Breaking Below Will Generate Significant Selling Pressure due to Hedging Demand

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BitMEX Founder: BTC at $20,000 and ETH at $1,000 Are Key Levels, Breaking Below Will Generate Significant Selling Pressure due to Hedging Demand

BitMEX founder Arthur Hayes, known for his accurate price predictions, recently evaluated the current market conditions on Twitter against the backdrop of record-high May CPI data and expectations of a significant interest rate hike. According to his analysis, the market is currently at a critical juncture, with BTC and ETH facing the risk of continued decline if they fall below the levels of 20,000 and 1,000, respectively.

Arthur Hayes Analyzes Current Market

Arthur Hayes stated that based on on-chain data for wBTC and ETH, most of the liquidations have already occurred. Observing the options market, the majority of open interest contract prices for BTC and ETH are around $20,000 and $1,000, respectively, indicating there are likely significant amounts of off-exchange structured products near these exercise prices.

If an investor sells a put option, they must hedge by selling spot against the Delta value. However, as the market price approaches the strike price, the Delta value increases nonlinearly, known as the Gamma value. This suggests that as the market price nears the strike price, more spot will be sold off.

According to data from the Laevitas website, there is significant open interest in put options for BTC and ETH at $20,000 and $1,000, respectively.

Note: In options, Delta measures the rate of change in the option price for a one-unit change in the underlying asset price. Gamma measures the rate of change of Delta per one-unit change in the underlying asset price, indicating the sensitivity of Delta. For option market data, you can refer to the Laevitas website.

From the above explanation, Arthur Hayes believes that if BTC and ETH prices unfortunately fall below $20,000 and $1,000, respectively, the market can expect significant selling pressure due to traders needing to hedge. Additionally, some off-exchange traders may suffer significant losses due to difficulties in hedging operations.

"Looking at the current charts, you best take out your Satoshi prayer book and pray for the soul of Satoshi Nakamoto to show mercy on the crypto markets. If these price levels are indeed breached, close your laptop as all charts will be useless for a while." Arthur Hayes remarked.