The increasing demand for options may have brought Bitcoin to the verge of a new parabolic increase or a sharp decrease.

According to Bloomberg, Bitcoin’s appreciation of more than 20% in the last week and continuous investments in ETFs have resulted in traders increasing their positions that the record level of $69,000 will be surpassed. Luke Nolan, a research specialist at CoinShares, a European investment company specializing in digital assets, said: “All things are pointing towards if momentum keeps us going up, then we could see another violent move upwards, but even a small change in ETF flows could cause people to quickly deleverage, it works both ways,” he said.

As investors flocked to short-term options, Bitcoin’s volatility rose to its highest level since the Silicon Valley Bank crash. Amberdata’s data recorded the notional value of call and put options on March 29 at nearly $7 billion, well above all other contracts.

The jump in short-term options sets the stage for what is known as a “Gamma Squeeze”, where a change in price can cause rapid market volatility. According to data from Deribit, the contracts expiring on March 29 have strike prices clustered at $65, $60 and $70,000.

“We can see still a huge amount of OTM calls,” Nolan said. If Bitcoin pushes to levels near that, then in my opinion we could certainly get a squeeze.”

Nolan also noted that when a large amount of call options are bought, option sellers have to buy the underlying asset to hedge their risk exposure, adding, “If Bitcoin starts going up, the dealers will have to hedge further, thus buying more of the underlying token. This self-perpetuating loop can lead to a rapid price increase as dealers push the price up, causing them to have to buy more,”

*OTM, Out of Money: An option is considered OTM if the current market price of the asset is lower than the strike price of the option. In this case, it makes no sense to use the option because it is possible to buy the asset directly on the market at a lower price.