Bitcoin’s latest recovery could have more upside as traders holding bearish volatility positions are forced to adjust or exit their bets, potentially adding another source of demand, according to Alexander Blume, founder and CEO of Two Prime.

Blume said repeated selling of Bitcoin call options has kept implied volatility relatively subdued, leaving those traders vulnerable if BTC continues to climb. A further price increase could require call sellers to hedge their exposure or close positions, creating additional buying pressure and potentially extending the rally.

“There are still a meaningful number of people short,” Blume said, describing the strategy of selling Bitcoin volatility at historically low levels as a particularly unfavorable trade.

Bitcoin and the broader crypto market have rebounded significantly in recent weeks. BTC briefly surpassed $82,000 on Thursday, reaching its highest level since May, before trading 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 keep interest rates unchanged in September. Spot Bitcoin ETFs attracted $731 million on Thursday, their largest daily inflow since January. However, stronger-than-expected employment data released Friday increased expectations that the Fed could raise rates.

Two Prime is a New York-based institutional Bitcoin asset manager and lender that works with corporate treasuries, miners, family offices and other investors. Founded in 2019, the firm says it has access to $3 billion in lending capacity.

Funding rates show the rally is not overly leveraged

Despite Bitcoin’s sharp advance, perpetual futures funding rates have remained below levels normally associated with excessive leverage or a market top, Blume said.

That suggests speculative futures positioning is not the primary force behind the rally. Demand from spot Bitcoin ETFs and renewed purchases by Bitcoin treasury companies are also supporting prices, according to Blume.

Strategy and Strive have restarted their Bitcoin acquisitions, potentially creating a reinforcing cycle in which higher BTC prices improve their ability to raise capital, allowing them to purchase more Bitcoin.

Bitcoin’s implied volatility dropped to roughly 23%-24% last month before climbing into the 40% range during the latest rally. Although the increase is substantial, Blume noted that volatility remains moderate by Bitcoin’s historical standards. If volatility rises further, traders who sold calls could face increasing pressure to hedge their positions.

$60,000 remains a key support level

Blume believes Bitcoin has established a base around $60,000 as long as the broader economic environment remains stable.

A major decline in stocks and other risk assets would pose the biggest threat to that outlook. “If there is a broader collapse in risk assets, bitcoin will fall as well,” he said.

Elevated Treasury yields, higher oil prices and persistent inflation continue to create headwinds for risk assets. Even so, Blume believes the market’s strong bearish positioning could amplify Bitcoin’s upside if economic data becomes even moderately more favorable.

He expects the Trump administration to emphasize economic stability while continuing to favor lower interest rates.

Blume also pointed to planned changes to parts of the personal consumption expenditures price index. He believes the adjustments could reduce reported inflation readings and potentially strengthen expectations for a more accommodative monetary policy.

Miners increasingly use Bitcoin as collateral

The stronger crypto market is also benefiting Two Prime’s lending business, Blume said, noting that demand for its financing services generally increases when Bitcoin prices rise.

Bitcoin miners are taking different paths as the sector expands into artificial intelligence. Cipher Mining and TeraWulf have made more aggressive moves toward AI infrastructure, while CleanSpark and MARA are attempting to preserve their Bitcoin operations while expanding into AI and power infrastructure.

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

The transaction shows how large miners can raise capital using their Bitcoin reserves as collateral while maintaining exposure to potential future gains if BTC prices continue to rise, Blume said.