Bitcoin price volatility increases before $23 billion options expiry.
Bitcoin’s volatility has intensified as the crypto market faces mounting pressure towards the end of 2025, driven by the impending expiration of approximately $23 billion worth of Bitcoin options. This substantial expiration amount, which constitutes more than half of the total open interest on Deribit, one of the largest platforms for Bitcoin options trading, is contributing to an already volatile environment in the crypto space.
The price swings in Bitcoin have been remarkable, with fluctuations exceeding $130 billion in notional value in just an hour of US trading recently. These rapid price movements have triggered a series of liquidations across both bullish and bearish positions, underscoring the uncertainty and instability in the market. Moreover, the total market capitalization of the crypto industry has been fluctuating around the $3 trillion mark, reflecting the heightened volatility in the broader market.
Market experts like Nick Forster, the founder of Derive.xyz, have expressed cautious sentiments given the current market conditions. As traders navigate through heavy positioning and decreasing liquidity towards the year-end, there is a sense of wariness as the market remains precariously balanced. Bitcoin attempted a brief recovery by climbing 4% to approximately $89,430 on Thursday before retracting these gains. Despite intermittent rallies, Bitcoin continues to trade about 30% lower than its peak in early October, emphasizing the significant shift in sentiment over the past few months.
Options data paints a bearish picture for Bitcoin, with implied volatility on the rise and negative skew indicating a preference for downside protection over upside exposure among traders. The concentration of bearish put options around the $85,000 level, with an estimated $1.4 billion in open interest, suggests a gravitational pull towards that price point as the options expiry nears. Additionally, preparations for hedging activities ahead of the MSCI decision on digital-asset companies’ inclusion in indexes and the resurgence of call-overwriting strategies are expected to add to downside volatility and constrain upward momentum.
Despite the prevailing fragility in sentiment, some traders are still holding onto hopes for a potential rebound. With Bitcoin poised for its worst quarterly performance since the second quarter of 2022, characterized by significant market events like the collapse of TerraUSD and the failure of hedge fund Three Arrows Capital, traders are wary of taking aggressive bets without a clear catalyst to restore confidence. However, the market remains prepared for a volatile start to the new year, with traders maintaining exposure to potential rebounds while prioritizing risk management strategies.
In conclusion, Bitcoin’s volatility has heightened as the market anticipates a significant options expiry and navigates through a delicate balance of uncertainty and market dynamics. Traders are bracing for a challenging period ahead, characterized by increased caution and anticipation of potential market movements in the crypto space.
