Bitcoin (BTC) may be heading for a volatile week ahead of the month’s end options expiry. The event has been expected since the beginning of December, as traders made bets on the year-end price of BTC.
Markets are preparing for one of the largest options expiry events of the year, as both weekly and monthly expirations happen this Friday, December 27. The markets expect $14B in BTC options (146,000 contracts) to expire, with another $3.8B in Ethereum (ETH) options.
On all other markets, BTC options may be above $19.8B, with $12B in bullish call options and around $7.8B in put options signaling a bearish outlook.
The current event will affect 44% of all BTC open interest and will be DeriBit’s largest options expiry event. For the rest of the market, the expiry is just slightly lower than October’s event. Of that amount, $4B in options are set to expire, leading to a payout to option holders. The favorable expiry may add to the market volatility and sway the overall direction of BTC.
The event was anticipated while BTC traded at $94,077.53, with a lower dominance of 56.3% of the market.
BTC options expiry may have unpredictable short-term effects
The exact effect of options is uncertain, as traders may attack some of the most probable positions. The options expiry event may have a double effect, either causing another rally or setting BTC up for a deeper correction.
After an overall bullish year, the mix of weekly, monthly, and yearly options expiry may put the market to the test. While the general BTC direction is bullish, in the short term, the market may sway unpredictably.
BTC options show enough call options to signal a bullish outlook. Leveraged positions are skewed toward BTC expansion, and may be attacked by sellers, causing a cascade of effects on the price. The fear ahead of the bullish options expiry is that even without concerted selling, the bullish momentum for BTC has diminished.
The coming week may see a significant fight around the $92,000-$94,000 per BTC price, where put options are concentrated. For now, the market may avoid the maximum pain scenario at $84,000, which would cause the biggest loss to the greatest number of positions.
Heightened trading activity may also sway the balance of options in the money at the $97,000 range. Traditionally, big events boost short-term volatility, including fakeout rallies. The most negative scenarios include a dip under $80,000. The roll over of positions into the next months may also signal the expectations for the BTC outlook in 2025.
After the September quarterly options expiry, the slightly bullish outlook helped to catapult the price to a new price range. This time, the options expiry may roll over some of the positions, as the bull market is expected to continue into 2025.
ETH options point to more bearish outlook
The December 27 expiry will affect $3.83B in ETH options, expiring at a maximum pain of $3,000 per ETH. This is unlikely, though, as ETH trades solidly above $3,400.
For ETH, put options dominate the overall open interest, signaling a more bearish scenario. Up to $3,370, put options are outpacing call contracts.
ETH sentiment has also deteriorated further in December, with more bearish traders compared to BTC. The ETH market is also reassessing its attitudes as both purely crypto traders and ETF buyers re-estimate their outlook.
The expectations for ETH also diminished as the altcoin market had only a very brief season. ETH did not lead a revival across the board and continues to underperform BTC at the end of the year. ETH still managed to rally from $2,272 at the start of 2024, though with significant drawdowns and volatility.
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