From the historical peak to the near one-month low, Bitcoin experienced a rollercoaster ride in the past week.
Just under a week ago, Bitcoin's price broke through $108,000, setting a new all-time high, while in the past 24 hours, its price briefly dipped below $92,500, marking the lowest level since November 26.
In the past week, Bitcoin's decline was about 13%, while Ethereum and Solana fell by 18% and 15%, respectively, and XRP dropped 12% to $2.18 during the same period. The meme sector was heavily impacted, with Dogecoin dropping 22% in the past week.
The market is at a critical point as the year ends. On one hand, the largest Bitcoin options contracts in history are about to expire, which could trigger severe volatility; on the other hand, the macroeconomic environment, especially the direction of the Federal Reserve's policies, adds extra pressure on the market.
$14 billion worth of 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 that for every 10 call options, there are 7 put options. This indicates a certain level of downward concern in the market. At the same time, the number of expiring contracts (146,000) is also considerable, which is double the number of contracts expiring in March 2025 (73,000).
Strijers further explained that the expiring contracts account for 44% of the total open interest in Bitcoin options (with a total value of $32 billion). Deribit exchange expects over $4 billion of these contracts to expire in execution, which will undoubtedly trigger a large amount of trading activity.
Deribit's volatility index (DVOL) has recently fluctuated sharply, and Strijers pointed out that this indicates a significant divergence among traders regarding the future trajectory of the market.
Strijers emphasized: 'The previously dominant bullish momentum is weakening, and the market is currently in a high-leverage upward state. If there is a significant decline, it could trigger a rapid backlash. All eyes will be on the upcoming options contract expiration date, as it may set the tone for market trends in 2025.'
Cryptocurrency fund inflows have significantly decreased, and ETFs faced record outflows.
Despite the net inflow of cryptocurrency funds remaining positive last week, after Federal Reserve Chairman Powell's hawkish remarks, cryptocurrency products faced record single-day outflows, resulting in a significant drop in inflow. CoinShares data shows that investors injected a total of $308 million into funds last week, including Bitcoin ETFs. However, on just Thursday, investors withdrew a record $576 million, and outflows rose to $1 billion on Friday.
Institutional activity may decrease, but the market still holds potential for a rebound.
David Lawant, head of research at crypto broker FalconX, wrote in a report that before the appearance of a 'bullish trajectory' in the first quarter of 2025, price volatility in the short term remains 'the most likely scenario.' Liquidity provider Arbelos Markets trading director Sean McNulty believes: 'Bulls should keep Bitcoin's price at $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 that investors should give up hope for a 'Christmas rally.' In a report on Monday, he wrote: 'As institutional activity is expected to decline and retail trading volume in the last two weeks of the year is anticipated to remain sluggish, volatility should continue to decrease. Although sustained negative momentum may lead to slight losses, the market still has the potential for a strong rebound.'
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