The market is at a crucial time as the year comes to a close. 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 Federal Reserve policy, is putting additional pressure on the market.
Options worth $14 billion are set to expire.
This Friday, Bitcoin options worth $14 billion in open interest (OI) will expire. The ratio of put options to call options for this expiry is 0.69, meaning there are 7 put options for every 10 call options. This indicates that there is some downward concern in the market. Additionally, the number of contracts expiring (146,000) is substantial, double that of the contracts expiring in March 2025 (73,000).
The contracts expiring this time account for 44% of the total Bitcoin options open interest (totaling $32 billion). It is expected that over $4 billion in contracts will expire and be executed, which will undoubtedly trigger a significant amount of trading activity.
The volatility index (DVOL) has been fluctuating sharply recently, indicating that traders still have significant disagreements about the future direction of the market.
The previously dominant bullish momentum is weakening, and the market is currently in a high-leverage upward state. If there is a significant drop, it may trigger a rapid counter-effect. All eyes will be on the upcoming options contract expiry date, as it could set the tone for market trends in 2025.
The inflow of cryptocurrency funds has significantly decreased, and ETFs have faced record outflows.
Although cryptocurrency funds maintained a net inflow last week, following the hawkish remarks from Federal Reserve Chairman Powell, cryptocurrency products faced record daily outflows, leading to a significant drop in inflows. Investors injected a total of $308 million into 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.
The core factor for the pullback remains the profit-takers cashing out.
During this cycle, whenever the profit margin for short-term investors reaches over 30%, the probability of a pullback increases rapidly, until their selling profit margin decreases or the cost of continued purchases becomes too high, leading to the next phase of market evolution.
At the same time, external changes also support the adjustment, which is a major force supporting the next step in BTC adoption: the Federal Reserve's interest rate cuts, the Trump effect, and MicroStrategy's BTC purchases have passed the initial strong period and entered a break during the holiday season. Coupled with factors such as the Christmas holiday, which significantly impacts BTC ETFs, it is reasonable for BTC to adjust accordingly.
The above factors are not short-term forces; in the long run, they will support the long-term development of BTC. Taking MicroStrategy as an example, on December 23, it will officially enter the Nasdaq 100 index, opening the door for mainstream U.S. funds to passively allocate BTC.
The inflow of funds over the past week has shown a noticeable slowdown and may continue for 1-2 months. Correspondingly, both long-term and short-term investors' selling scale has also begun to slow down significantly, returning to levels seen before this round of rising. With the balance of both, the probability of the market being in a volatile state increases.
During this period, if the funding remains in a relatively net inflow state and short-term investor costs rise further above $90,000, the potential for the next major upward wave will further open up.
The relative support level for this adjustment may be around $85,000—the cost line for short-term investors, which is currently on a gradual upward trend.
Institutional activity may decrease, but there is still potential for a rebound in the market.
Bulls should maintain Bitcoin's price at the $90,000 level until the end of the year, but if it falls below that level, it could trigger further liquidations.
Although trading activity in the cryptocurrency market may decrease for the remainder of this year, this does not mean that investors should give up hope for a 'Christmas rally.' With expectations of institutional activity declining and retail trading volume expected to remain sluggish in the last two weeks of the year, volatility should continue to decrease. While ongoing negative momentum may lead to slight losses, there is still a possibility of a strong rebound in the market.
For altcoins to rise, they must wait for Bitcoin to decline. A few days ago, when Bitcoin pulled back, altcoins fell with it. When Bitcoin dropped by one point, altcoins fell by several points or even over ten points. As of yesterday, when Bitcoin dropped more than two points, most altcoins no longer followed the decline. Bitcoin's market share has also decreased, which is a good thing.
Since altcoins do not follow Bitcoin's decline, it indicates that altcoins have reached a relative bottom. Bitcoin cannot keep falling indefinitely and will also rebound. When Bitcoin rebounds, altcoins will rebound even more.
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