Article source: BitPush
Author: BitpushNews
From a historical high to a recent low in the past month, Bitcoin has experienced a rollercoaster ride in the past week.
Just less than a week ago, Bitcoin's price broke above $108,000, setting a historical high, but within the past 24 hours, its price briefly fell below $92,500, hitting the lowest level since November 26.
Bitcoin's decline over the past week was about 13%, while Ethereum and Solana fell 18% and 15%, respectively, and XRP dropped 12% to $2.18 during the same period. The meme sector was hit hard, with Dogecoin falling 22% in the past week.
The market is at a critical period as we approach the end of the year. On one hand, the largest Bitcoin options contracts in history are about to expire, which may trigger significant volatility; on the other hand, the macroeconomic environment, especially the direction of the Federal Reserve's policies, adds extra pressure to the market.
$14 billion options expiry
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 that there are certain concerns about downside risks in the market. At the same time, the number of expiring contracts (146,000) is also substantial, being twice the number of contracts expiring in March 2025 (73,000).
Strijers further explained that the expiring contracts account for 44% of all currently open Bitcoin options contracts (totaling $32 billion). Deribit exchange anticipates that over $4 billion in contracts will expire and execute, which will undoubtedly trigger a large amount of trading activity.
Deribit's volatility index (DVOL) has fluctuated sharply recently, and Strijers pointed out that this indicates that traders still have significant divergence 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 may trigger a rapid backlash. Everyone's attention will be focused on the upcoming options expiration date, as it may set the tone for market trends in 2025."
Crypto fund inflows have sharply declined, and ETFs have faced record outflows.
Although cryptocurrency funds maintained a net inflow last week, after Federal Reserve Chairman Powell's hawkish speech, cryptocurrency products experienced record single-day fund outflows, leading to a significant drop in inflows. Data from CoinShares shows that investors injected a total of $308 million into the funds last week, including Bitcoin ETFs. However, on Thursday alone, investors withdrew a record $576 million, and the outflow increased to $1 billion on Friday.
Institutional activity may decrease, but there is still a possibility of a market rebound.
David Lawant, head of research at crypto broker FalconX, wrote in a report that short-term price volatility is still the most likely scenario before a 'bullish trajectory' appears in the first quarter of 2025. Sean McNulty, trading director at liquidity provider Arbelos Markets, believes: "Bulls should maintain Bitcoin's price at the $90,000 level by the end of the year, but if it falls below that level, it may trigger further liquidations."
According to MarketWatch data, the 'Christmas rally' typically 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 this year, it does not mean that investors should give up hope for a 'Christmas rally.' In a report on Monday, he wrote: "As expectations for institutional activity decline, and retail trading volume is expected to remain low in the last two weeks of the year, volatility should continue to decrease. Although ongoing negative momentum may lead to minor losses, the market still has the potential for a strong rebound."
