End-of-Year Bitcoin Options Storm: $14 Billion Mystery to Unravel
The market is at a critical period for year-end closing.Author: BitpushNews
From a historical high to a near one-month low, Bitcoin has experienced a rollercoaster ride over the past week.
Just less than a week ago, the price of Bitcoin surged past $108,000, setting a new all-time high, while in the past 24 hours, its price briefly fell below $92,500, marking the lowest level since November 26.
Over the past week, Bitcoin has dropped about 13%, while Ethereum and Solana fell 18% and 15%, respectively. XRP also declined by 12% to $2.18 during the same period. The meme sector has been hit hard, with Dogecoin dropping 22% in the past week.
The market is at a critical juncture as the year comes to a close. On one hand, the largest Bitcoin options contracts in history are about to expire, potentially triggering significant volatility; on the other hand, the macroeconomic environment, especially the direction of the Federal Reserve's policies, is adding extra pressure to the market.
$14 Billion in Options Expiration
This Friday, $14 billion worth of Bitcoin options open interest (OI) will expire. According to data released by Deribit exchange CEO Luuk Strijers, the ratio of put options to call options for this expiration is 0.69, meaning there are 7 put options for every 10 call options. This indicates a certain level of bearish sentiment in the market. Additionally, the number of contracts expiring (146,000) is substantial, double that of the contracts expiring in March 2025 (73,000).
Strijers further explained that these expiring contracts account for 44% of the total open interest in Bitcoin options (totaling $32 billion). Deribit expects that over $4 billion of these contracts will be executed upon expiration, which will inevitably trigger a large amount of trading activity.
Deribit's volatility index (DVOL) has fluctuated sharply recently, and Strijers pointed out that this indicates significant disagreement among traders regarding the future direction of the market.
Strijers emphasized: "The previously dominant bullish momentum is weakening, and the market is currently in a high-leverage upward state. If a significant drop occurs, it could trigger a rapid backlash. All eyes will be on the upcoming options expiration date, as it may set the tone for the market in 2025."
Significant Decline in Cryptocurrency Fund Inflows, ETFs Face Record Outflows
Although cryptocurrency funds maintained a net inflow last week, following hawkish remarks from Federal Reserve Chairman Powell, cryptocurrency products faced record single-day outflows, leading to a significant drop in inflows. Data from CoinShares shows that investors injected a total of $308 million into funds last week, including Bitcoin ETFs. However, on Thursday alone, investors withdrew a record $576 million, with outflows rising to $1 billion on Friday.
Institutional Activity May Decrease, but Market Still Holds Rebound Potential
David Lawant, head of research at cryptocurrency broker FalconX, wrote in a report that before a "bullish trajectory" emerges in the first quarter of 2025, price volatility in the short term is the most likely scenario. Sean McNulty, trading director at liquidity provider Arbelos Markets, believes: "Bulls should aim to keep Bitcoin's price at the $90,000 level by the end of the year, but if it falls below that level, it could trigger further liquidations."
According to MarketWatch data, typically, the "Christmas rally" occurs during the last five trading days of the year and the first two trading days of the new year.
BRN analyst Valentin Fournier stated that while trading activity in the cryptocurrency market may decrease for the remainder of the year, this does not mean investors should give up hope for a "Christmas rally." In a report on Monday, he wrote: "With expectations of institutional activity declining and retail trading volume expected to remain low in the last two weeks of the year, volatility should continue to decrease. Although sustained negative momentum may lead to slight losses, the market still has the potential for a strong rebound."
