As 2024 approaches, the Bitcoin market is at a critical juncture, with a large-scale options expiration today, alongside a sharp drop in Binance's Bitcoin reserves.
On Thursday and Friday, Bitcoin experienced a pullback after three consecutive days of gains, with the price dropping 3.5% to $93,440, following a record high of $108,000 on December 17. Moreover, the cryptocurrency index, including Ethereum, also fell by about 3.5%.
This is a mixed result of year-end and holiday risk reduction. The market hovers around the $100,000 mark, seemingly indicating that large funds are satisfied with this level and are ready to wrap up trading for the year.
The Bitcoin market is currently facing multiple factors. On one hand, institutional investors continue to buy heavily, injecting confidence into the market; on the other hand, the upcoming large options expiration may trigger short-term volatility. Additionally, Binance's Bitcoin reserves have plummeted, indicating that the price of Bitcoin may rise.
The large options expiration may trigger market volatility.
As the year-end approaches, the market may experience volatility in the coming days due to the large open contracts of Bitcoin and Ethereum derivatives that are set to expire.
According to media reports, on December 27, Bitcoin will face an options expiration date worth $14.27 billion, with the highest open interest for options at a strike price of $90,000. Data from the derivatives exchange Deribit, which holds a 72% share of the Bitcoin options market, shows that open contracts for call options amount to $8.45 billion, while open contracts for put options total $5.82 billion.
Regarding the impact of options expiration on Bitcoin's price:
If the price of Bitcoin remains above $95,000: The call options with a strike price of $90,000 will remain 'in the money', and holders may choose to exercise them, leading to buying pressure. Market makers may need to purchase Bitcoin in the spot or futures market to cover their exposure, which could create short-term upward pressure on the price.
If the price of Bitcoin falls below $90,000: The call options with a strike price of $90,000 will become 'out of the money', potentially causing these options to lose value. Put option holders may choose to exercise their options, which could increase selling pressure and exacerbate Bitcoin's downward momentum.
Binance's Bitcoin reserves have plummeted.
Changes in Bitcoin reserves have also attracted market attention, as Binance, the world's leading cryptocurrency exchange, sees its Bitcoin reserves drop to the lowest level since January this year, raising expectations that the price of Bitcoin may rise significantly.
Earlier this month, as Binance's reserves dropped to around 564,000 coins, the price of Bitcoin first broke the $100,000 mark, after which the reserves began to rise slightly, and the price of Bitcoin started to fall.
The reduction in Binance's reserves indicates that investors are confident in the long-term prospects of Bitcoin, choosing to withdraw their held Bitcoin from the exchange rather than leaving it on the exchange for short-term sale. This view suggests that the market may be brewing a wave of upward momentum.
