Bitcoin’s price action in recent months has presented a puzzling paradox for even the most seasoned market observers. Despite an influx of institutional capital via spot Bitcoin Exchange Traded Funds (ETFs) that has shattered previous records for asset accumulation, the flagship cryptocurrency has struggled to break decisively above key resistance levels. While traditional ETF investors demonstrate a clear willingness to pay premiums to gain long exposure, an underlying force rooted in the sophisticated strategies of early Bitcoin holders – the ‘OGs’ – appears to be acting as a significant suppressive agent: the selling of covered calls.
At first glance, the narrative surrounding Bitcoin should be overwhelmingly bullish. The launch of spot Bitcoin ETFs in the United States in January unleashed a torrent of new capital, attracting billions from traditional finance heavyweights and retail investors alike. These ETFs have seen unprecedented inflows, rapidly accumulating hundreds of thousands of BTC and establishing themselves as one of the most successful ETF launches in history. This direct buying pressure on the spot market, where ETFs acquire actual Bitcoin to back their shares, should theoretically propel BTC prices significantly higher, especially given Bitcoin’s historically inelastic supply.
However, the market’s inability to sustain upward momentum suggests a powerful counter-force is at play. This force, as identified by leading analysts, stems from the behavior of Bitcoin’s ‘Original Gangsters’ – early adopters, miners, and long-term holders who acquired their BTC at fractions of current prices. These OGs, sitting on substantial, largely unrealized gains, represent a significant portion of Bitcoin’s liquid supply. Rather than outright selling their holdings in the spot market, many are employing a more nuanced options strategy: selling covered calls.
A covered call strategy involves owning the underlying asset (in this case, Bitcoin) and simultaneously selling call options against it. By doing so, the seller collects a premium from the buyer of the option. In return for this premium, the seller commits to selling their Bitcoin at a predetermined ‘strike price’ if the price reaches that level before the option’s expiry date. For OGs with extremely low cost bases, this strategy is incredibly attractive. It allows them to generate consistent yield on their otherwise dormant assets, effectively lowering their net cost basis further or creating a passive income stream, all while maintaining their long-term conviction in Bitcoin’s value.
The critical aspect, however, lies in how this derivative activity translates into spot market pressure. When an OG sells a covered call, they are essentially creating a synthetic supply of Bitcoin at a higher price point. Market makers, who typically facilitate these options trades, need to hedge their positions to remain delta-neutral. If a market maker buys a call option from an OG, they are now ‘short gamma’ and ‘long delta’ to some extent, meaning they are exposed to upside price movements. To mitigate this risk, market makers will often short Bitcoin futures or even sell spot Bitcoin directly. This hedging activity by market makers introduces a constant, albeit indirect, selling pressure into the market, effectively soaking up the demand generated by ETF inflows.
Consider the dynamic: ETF investors are buying spot Bitcoin, creating upward price pressure. Simultaneously, market makers are selling spot Bitcoin or futures to hedge the covered calls sold by OGs, creating downward or sideways pressure. This creates a supply overhang at specific strike prices, acting like an invisible ceiling. As Bitcoin’s price approaches these strike prices, market makers are forced to sell more to maintain their hedge, increasing the resistance. This phenomenon explains why Bitcoin might consolidate or even pull back despite strong fundamental buy-side indicators – the constant, derivatives-driven supply coming online from OG hedging strategies neutralizes much of the spot demand.
Furthermore, the low cost basis of OGs means they can sell calls with relatively distant strike prices (e.g., 20-30% above current market price) and still earn attractive premiums, making it a sustainable strategy for them. This creates a perpetual wall of potential supply at higher levels, dampening volatility and preventing explosive parabolic moves that characterize previous bull runs. It suggests a maturing market where sophisticated financial instruments are increasingly influencing price discovery, moving beyond simple spot supply and demand dynamics.
This evolving market structure presents a nuanced challenge. While the entry of institutional capital via ETFs is undeniably bullish for long-term adoption and legitimization, the short-to-medium term price action is being heavily influenced by the strategic maneuvers of early holders. For Bitcoin to experience a truly unbridled surge, one of two things must likely occur: either the buying pressure from ETFs and other demand sources overwhelms the synthetic supply created by OG covered calls, pushing prices well beyond the common strike walls, or OGs themselves shift their strategy, perhaps by reducing call selling or letting options expire unexercised as their conviction for higher prices strengthens. Until then, Bitcoin’s path to new all-time highs may remain a more gradual ascent, with its ‘OGs’ inadvertently acting as a crucial, yield-seeking speed bump.