Bitcoin's Surge to $97K: A Structural Shift and the Potential for a Gamma Squeeze
Bitcoin (BTC) recently breached the $97,000 mark, extending a rally that suggests a fundamental change in how capital interacts with the asset class. Reaching a peak of $97,860 – its highest price since November – this performance has propelled the broader crypto market upwards. However, this isn’t simply speculative fervor. A confluence of on-chain metrics indicates renewed institutional interest colliding with a surprisingly resilient supply side. This article delves into the factors driving Bitcoin’s current uptrend, exploring the potential for a significant price acceleration, potentially fueled by a gamma squeeze.
The Resurgence of Institutional Demand: ETF Inflows as a Catalyst
The primary driver behind the recent price appreciation is a substantial re-acceleration in inflows into US spot Bitcoin ETFs. Data from Coinperps reveals that the 12 Bitcoin ETF products have collectively seen inflows exceeding $1.5 billion in the last two days alone. This influx of capital is significant, especially considering Bitcoin’s post-halving issuance rate of roughly 450 BTC per day. At current prices, this daily issuance represents a relatively small dollar amount compared to the demand demonstrated by high-inflow ETF days.
While ETF flows aren’t the sole source of spot buying, they represent a highly visible and regulated channel for incremental demand. This effect is amplified during institutional rebalancing or broader “risk-on” market sentiment. Consequently, ETF flow data has become a crucial macro-like signal for the crypto sector, explaining Bitcoin’s resilience even during periods of quiet crypto-native narratives.
Spot Market Strength Confirmed by On-Chain Data
Data from CryptoQuant reinforces the narrative of spot-led strength. The firm’s 90-day Spot Taker CVD (Cumulative Volume Delta) began turning positive around $86,000, signaling increased buying pressure. This indicates that market buy volume consistently outweighed sell volume well before the recent price surge. Furthermore, the quality of this buying is noteworthy. Spot Average Order Size flashed “Whale Orders” during the same period, indicating that larger entities, rather than dispersed retail investors, are driving the demand.
These investors are prioritizing spot purchases over leveraged positions, suggesting a more sustainable rally. This contrasts with previous cycles where leveraged trading often fueled unsustainable price spikes.
Profit-Taking Slows: A Key Ingredient for Continued Ascent
The second crucial element supporting the move is the diminished intensity of profit-taking. Glassnode’s recent market analysis shows realized profit falling sharply from levels seen in the fourth quarter of 2025. BTC's 7-day moving average of realized profit for long-term holders has dropped to approximately $183.8 million per day, a significant decrease from over $1 billion per day in late 2025.
Bitcoin rallies require not only buyers but also fewer eager sellers. As profit-taking subsides, even moderate demand can drive prices higher because the market isn’t constantly being flooded with supply from holders locking in gains.
Value Days Destroyed (VDD) Signals Long-Term Holder Conviction
This reluctance to sell is further evidenced by the Value Days Destroyed (VDD) indicator. Currently, VDD stands at approximately 0.53 (as of January 2026), a historically low level. This suggests that the BTC being transferred on the network is relatively young, implying that older, long-held coins remain untouched. Historically, a rising Bitcoin price paired with a muted VDD reading signals a robust expansion, allowing incoming demand to lift prices more efficiently.
Derivatives as an Accelerant: Short Liquidations and Options Positioning
The third driver is the impact of derivatives positioning. As Bitcoin pushed upward, a wave of short liquidations occurred, forcing traders who had bet against the move to buy back BTC to cover their positions. These events can create abrupt “air pockets” as stop-loss orders are triggered and liquidations cascade. Glassnode data showed the latest move triggered the largest short liquidation event since October 10 across the top 500 cryptocurrencies.
However, the more structural shift may be in options markets. Glassnode noted the largest-ever options open interest reset around the late-December expiry, with open interest dropping from 579,258 BTC to 316,472 BTC – a reduction of over 45%. This change impacts how market makers hedge risk.
Dealer Gamma and the Potential for a Gamma Squeeze
Glassnode also flagged that dealer gamma was short in the ~$95,000–$104,000 zone. This setup can amplify upside once the price begins rising, as hedging flows align with the move rather than dampen it. This is the core of the gamma squeeze potential. As the price moves higher, dealers are forced to buy more BTC to remain delta neutral, further accelerating the price increase. CryptoQuant data confirms that futures participation arrived later in the sequence and was dominated by retail activity, aligning with the overall upward trend.
Macro and Policy Tailwinds: A Supportive Backdrop
Bitcoin doesn’t operate in isolation. Macroeconomic factors have provided a more favorable backdrop this week. The latest US CPI release showed headline inflation at 2.7% year-over-year in December, with core CPI at 2.6%. A softer inflation impulse can reduce the odds of further tightening shocks and support risk appetite.
Real yields remain historically meaningful, but a less hawkish inflation outlook can be enough to support a rebound, especially when spot flows and positioning are aligned. Furthermore, the evolving US policy conversation around crypto market structure, particularly the CLARITY Act, offers a potential long-term positive catalyst by creating clearer regulatory boundaries.
Can Bitcoin Continue the Run? Key Levels to Watch
The question now is whether Bitcoin can sustain this momentum. Glassnode highlights the Short-Term Holder (STH) cost basis around ~$99,100 as a critical threshold. If the price reclaims this level, the market can grind higher as sellers are absorbed, especially if derivatives hedging remains supportive.
However, Bitcoin is also entering an overhead supply zone between roughly $92,100 and $117,400, where many buyers have their cost bases. This implies that as the price rises, it may encounter resistance from sellers near breakeven. Two scenarios are plausible: continued upward momentum if ETF inflows remain positive, or a failure scenario if the price repeatedly rejects below the STH cost basis and macro conditions tighten.
The current market conditions suggest a strong potential for continued gains, but vigilance and monitoring of key on-chain metrics and macroeconomic factors are crucial.
Mentioned in this article
Bitcoin
CryptoQuant
Glassnode
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