Bitcoin’s Rally Could Extend as Volatility Shorts Unwind, Two Prime CEO Says

Bitcoin’s latest recovery could have more upside as institutional traders unwind losing volatility positions, according to Alexander Blume, founder and CEO of crypto asset manager Two Prime.

Blume told CoinDesk that investors have repeatedly sold Bitcoin call options, keeping implied volatility suppressed while leaving those traders vulnerable to sharp price increases. If BTC continues to climb, call sellers may be forced to hedge or close their positions, potentially adding further buying pressure.

“There are still a meaningful number of people short,” Blume said, describing the practice of selling Bitcoin volatility at historically low levels as an especially unattractive trade.

Bitcoin and the broader cryptocurrency market have strengthened in recent weeks. BTC briefly moved above $82,000 on Thursday, reaching its highest level since May, before pulling back to around $78,500 at the time of publication.

The recovery was initially supported by declining bond yields, larger Treasury debt buybacks and expectations that the Federal Reserve could leave interest rates unchanged in September. Spot Bitcoin exchange-traded funds attracted $731 million on Thursday, marking their strongest single-day inflow since January. However, stronger-than-expected employment data released Friday later increased expectations of a potential rate hike.

Two Prime, a New York-based institutional Bitcoin asset manager and lender, serves corporate treasuries, miners, family offices and other investors. The company was founded in 2019 and says it has access to $3 billion in lending capacity.

Funding rates suggest a healthier rally

Despite Bitcoin’s rapid advance, perpetual futures funding rates have not reached levels normally associated with excessive leverage or an imminent market top, Blume said. That suggests the latest rally is not being driven primarily by speculative traders piling into leveraged positions.

Spot ETF inflows are providing additional support, along with renewed purchases from companies that hold Bitcoin as part of their treasury strategies, he said.

Strategy and Strive have returned to the market as buyers, creating a feedback loop in which higher Bitcoin prices improve their ability to raise capital, which can then be used to purchase additional BTC.

Bitcoin’s implied volatility dropped to approximately 23%-24% last month before rising into the 40% range during the latest rally, according to Blume. Although the increase is significant, volatility remains relatively moderate compared with Bitcoin’s historical levels. That could leave call sellers increasingly exposed if volatility continues climbing.

Bitcoin’s $60,000 support level

Blume believes Bitcoin has established a potential floor around $60,000, assuming broader economic conditions remain relatively stable.

The primary risk would be a major decline across equities and other risk assets. “If there is a broader collapse in risk assets, bitcoin will fall as well,” he said.

Higher Treasury yields, elevated oil prices and persistent inflation continue to pose challenges for risk assets. However, Blume believes the market’s widespread bearish positioning could amplify Bitcoin’s reaction to even modestly positive economic developments.

He expects the Trump administration to focus on maintaining economic stability while advocating for lower interest rates.

Blume also highlighted planned changes to portions of the personal consumption expenditures price index. He expects those adjustments could reduce reported inflation readings and potentially strengthen the case for a more accommodative interest-rate outlook.

Miners turn to borrowing instead of selling

The improving crypto market is also benefiting Two Prime, Blume said, noting that demand for the firm’s lending services generally rises alongside Bitcoin prices.

Bitcoin miners are taking different approaches as the sector expands into artificial intelligence infrastructure. Cipher Mining and TeraWulf have made the strongest moves toward AI, while CleanSpark and MARA are seeking to maintain their Bitcoin operations while also expanding into AI and power-related businesses.

MARA sold more than 23,000 BTC during the first half of the year but has recently chosen to borrow against its remaining Bitcoin rather than sell additional holdings. In August, the miner secured $600 million in financing from Coinbase and Two Prime.

The arrangement demonstrates how large-scale miners can tap their Bitcoin reserves for liquidity without giving up potential gains if BTC prices continue to rise, Blume said.

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