How BTC OGs Selling Covered Calls Are Holding Back Bitcoin’s Price Rally

Long-term Bitcoin holders, often referred to as "BTC OGs," have increasingly adopted covered call strategies by writing call options against their Bitcoin holdings. This activity, confirmed through rising open interest in near-the-money call options on major derivatives platforms, is widely interpreted as creating resistance that may suppress Bitcoin’s price rallies. Understanding this dynamic is crucial as Bitcoin navigates volatile market conditions with growing derivatives complexity.

What happened

Data from derivatives exchanges such as Deribit and CME show a significant increase in open interest in Bitcoin call options, particularly at strike prices close to the current market value. These options are predominantly written by long-term holders ("BTC OGs") who use covered call strategies—selling call options on Bitcoin they already own to generate premium income while maintaining their positions. This approach obligates the sellers to deliver Bitcoin at the strike price if the option is exercised.

Covered call writing effectively places a cap on potential price gains because sellers are incentivized or required to sell Bitcoin at predetermined strike prices, which can limit upward price movement beyond those levels. Reports from Cointelegraph and market analysts note that Bitcoin price rallies frequently stall near clusters of large open interest in call options, suggesting these strike levels act as psychological or mechanical resistance.

While the Bitcoin spot and derivatives markets continue to exhibit robust liquidity overall, some analysts observe that during periods of heavy options expiry and elevated covered call activity, bid-ask spreads widen and spot trading volume diminishes. This suggests an interplay between options market positioning and spot market liquidity that could influence price discovery.

Interpretations differ regarding the net impact of covered calls. Some analysts argue that the presence of large covered call positions creates supply pressure at specific price points, thereby dampening upward momentum. Others point out that covered calls introduce option premiums and hedging opportunities, which can enhance liquidity and stabilize prices. Additionally, some research suggests that macroeconomic factors such as regulatory developments and adoption trends may play a more decisive role in Bitcoin’s price movements than options strategies alone.

Why this matters

The growing use of covered call strategies by long-term Bitcoin holders has structural implications for price formation and market dynamics. By writing calls against their holdings, BTC OGs effectively create predefined price ceilings where they may be forced to sell Bitcoin, potentially limiting the upside during rallies. This dynamic can introduce resistance levels that influence trader behavior and price discovery, as market participants anticipate where significant supply could emerge.

Such resistance can affect liquidity conditions, as evidenced by periods of wider bid-ask spreads and reduced spot volume coinciding with heavy options expiry. This interaction between derivatives positioning and spot market liquidity highlights how sophisticated options strategies can have real effects on price dynamics beyond simple supply and demand in the spot market.

Furthermore, understanding the role of covered calls is important for market participants and policymakers alike. For traders, it contextualizes why Bitcoin rallies may stall despite positive fundamentals or broader macroeconomic tailwinds. For regulators and market observers, it underscores the increasing complexity of crypto markets where derivatives activity can shape price behavior, potentially affecting market stability and investor protection considerations.

What remains unclear

Despite the confirmed rise in covered call activity and its correlation with price resistance, several key questions remain unresolved. Most notably, there is no publicly available data quantifying what proportion of the total Bitcoin supply is effectively "covered" by call options written by long-term holders. Without this, it is difficult to gauge the scale of potential supply pressure exerted by these positions.

Additionally, the extent to which premiums collected from covered call writing influence BTC OGs’ willingness to sell or hold Bitcoin during rallies is unknown. It is unclear whether the income generated from premiums incentivizes holders to maintain positions longer or to sell earlier, which would have differing impacts on price dynamics.

Another open question concerns the role of market makers and option writers who hedge their exposure. How their hedging activities interact with covered call positions to affect spot liquidity and volatility remains insufficiently documented. This complicates efforts to isolate the direct impact of covered calls on price suppression.

Finally, there is no definitive causal evidence linking covered call writing to price suppression, as confounding factors such as macroeconomic events, regulatory news, and broader market demand also influence Bitcoin’s price. Existing analyses rely mainly on correlations between open interest clusters and price resistance rather than direct proof of causation.

What to watch next

Further disclosures or research quantifying the proportion of Bitcoin supply covered by call options, especially those attributed to long-term holders.
Detailed analysis of option premiums collected by BTC OGs and their subsequent trading or holding behavior during price rallies.
Data on market makers’ and option writers’ hedging flows to better understand the interplay between derivatives positioning and spot market liquidity.
Monitoring bid-ask spreads and spot volume around major options expiries to assess liquidity shifts linked to covered call activity.
Broader macroeconomic and regulatory developments that may interact with derivatives market positioning to influence Bitcoin’s price dynamics.

While the rise of covered call writing among BTC OGs is a confirmed factor correlated with resistance to Bitcoin’s price rallies, the precise scale and mechanisms of its impact remain uncertain. As the derivatives market matures, greater transparency and data will be essential to disentangle these effects from broader market forces and to understand their implications for price discovery and market stability.

Source: https://cointelegraph.com/news/bitcoin-ogs-covered-calls-suppressing-price?utm_source=rss_feed&utm_medium=rss&utm_campaign=rss_partner_inbound. This article is based on verified research material available at the time of writing. Where information is limited or unavailable, this is stated explicitly.