Bitcoin's recent performance has been like a roller coaster. Last week it just broke through $108,000, setting a new historical high, but in less than a week, the price actually fell below $92,500, marking the lowest point since November 26.
In the past week, Bitcoin fell by about 13%, while Ethereum and Solana dropped by 18% and 15% respectively, and XRP also declined by 12%, currently priced around $2.18. The Meme sector was hit hardest, with Dogecoin falling 22% in a week.
The market is currently at a critical year-end moment. On one hand, the largest Bitcoin options contracts in history are about to expire, potentially triggering significant volatility; on the other hand, the macroeconomic environment, particularly the Federal Reserve's policy direction, also adds extra pressure to the market.
$14 billion in options are about to expire
This Friday, $14 billion worth of Bitcoin options outstanding contracts (OI) will expire. According to Deribit exchange CEO Luuk Strijers, the ratio of put options to call options in this batch of expiring contracts is 0.69, meaning that for every 10 call options, there are 7 put options, indicating market concerns about downside risks. At the same time, the total number of expiring option contracts reached 146,000, which is double that of the contracts expiring in March 2025 (73,000 contracts).
Strijers further explained that the expiring contracts account for 44% of the total outstanding Bitcoin options contracts, which is $14 billion out of $32 billion. Deribit exchange expects that more than $4 billion in options will be exercised at expiration, resulting in a significant amount of trading activity.
At the same time, Deribit's volatility index (DVOL) has experienced significant fluctuations recently, with Strijers pointing out that this indicates a large divergence in traders' views on the future direction of the market.
Strijers emphasized, 'The bullish momentum that previously dominated the market is weakening, and the current market is in a high-leverage upward state. If a significant drop occurs, it could trigger a rapid rebound effect. Everyone's attention is focused on the upcoming options expiration date, as this may set the tone for the market trends in 2025.'
Cryptocurrency fund inflows have significantly decreased, and ETFs have faced record outflows
Despite the net inflow status of cryptocurrency funds last week, cryptocurrency products faced a record daily outflow of funds following a hawkish speech by Federal Reserve Chairman Powell, leading to a significant decline in inflows. According to CoinShares, 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 by Friday, the outflow had risen to $1 billion.
Institutional activity may decrease, but there is still potential for a market rebound
David Lawant, head of research at cryptocurrency broker FalconX, stated in a report that market prices may continue to fluctuate until the first quarter of 2025, with the most likely scenario being significant volatility in the short term. Sean McNulty, trading director at liquidity provider Arbelos Markets, believes, 'Bulls hope to keep Bitcoin's price around $90,000 until the end of the year, but if it falls below this level, it could trigger more liquidations.'
According to MarketWatch, 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 the year, it does not mean that investors should give up on the expectation of a 'Christmas rally.' In a report on Monday, he wrote, 'With expectations of institutional activity declining, and retail trading volume expected to remain low in the last two weeks of the year, volatility may continue to decline. While sustained negative momentum may lead to small losses, the market still has the potential for a strong rebound.'
