Traders expect that during the Christmas trading week, Bitcoin's price volatility will continue due to significant options expirations putting pressure on market dynamics, which may lead to a rotation into altcoins.
"All eyes are on this Friday's massive expiration, when nearly $20 billion in notional value of Bitcoin and Ethereum options will expire," QCP Capital from Singapore said in a message earlier on Tuesday. "This accounts for almost half of Deribit's total open interest. We believe that if spot continues to fluctuate within this range and options sellers continue to roll their short positions, this scenario is quite likely to occur."
"Rolling" means that traders are moving their positions to a later expiration date. This is usually a practice to keep trades active while they still believe in their market predictions.
High volatility is favorable for options buyers, as it increases the chances that options will be in profit at some point before expiration—thus creating profits for buyers.
"As Bitcoin continues to struggle below $100,000, we may also see altcoins begin to catch up," QCP Capital stated, adding that a similar trend was observed a month ago when Bitcoin was trading at current levels. At that time, the Ethereum/Bitcoin ratio rebounded from the support level of 0.032, driving movement in altcoins.
The cryptocurrency market often experiences cyclical changes, where Bitcoin leads the way up first, followed by altcoins. Investors seek additional returns by utilizing newly gained market profits, leading to capital flowing into altcoins, which triggers a sharp rebound in a short time.
Currently, Bitcoin is experiencing one of its worst Decembers to date, dimming the seasonal bull market period, having fallen 2% over the past 30 days. Due to profit-taking and cautious sentiment after weeks of price volatility, the hope for a "Christmas rally"—the phenomenon of assets tending to rise during Christmas week—has dissipated.
Some warn that as the Federal Reserve signals a reduction in rate cuts next year and emphasizes that it is not seeking national Bitcoin reserves, Bitcoin could face further declines.
However, Alex Kuptsikevich from FxPro stated that Bitcoin falling below $90,000 could mean new opportunities for market traders.
"In a potential shock scenario, Bitcoin could suddenly dip below the $70,000 region. However, the likelihood of a pullback to $90,000 in the coming weeks is greater, which would be attractive enough for buyers to prevent sell-offs," Kuptsikevich said. "The market continues to digest the Federal Reserve's more hawkish stance, which is reinforced by the impulse to lock in profits, especially after a strong year."#BTC☀