Bitcoin is under significant pressure in the final weeks of 2025. Approximately $23 billion worth of Bitcoin options contracts are set to expire next Friday, potentially amplifying market volatility amid already elevated price swings. This expiration represents over half of the total open interest on Deribit, the world's largest Bitcoin options exchange, signaling traders' continued pricing of downside risks.
Recent market movements have been exceptionally turbulent. During Wednesday's U.S. trading session, Bitcoin saw hourly price swings exceeding $130 billion, triggering cascading liquidations of both long and short positions. Meanwhile, the total cryptocurrency market capitalization continues to fluctuate near the $3 trillion threshold, reflecting heightened market tension.
Nick Forster, founder of digital asset platform Derive.xyz, noted that as the new year approaches, the market remains in a fragile "knife-edge" state. On Thursday, Bitcoin briefly rallied 4% to $89,430 before surrendering gains and dipping below $85,000 to $84,450.02—nearly 30% below its October peak above $126,000.
Options market structure reveals persistent bearish sentiment. Bitcoin's 30-day implied volatility has rebounded to around 45%, while the options skew remains near -5%, indicating stronger demand for downside protection than upside exposure. Longer-dated skews also remain negative, suggesting traders are preparing for continued downside risks in Q1 and Q2 2026, particularly amid renewed selling pressure from previously dormant wallets.
The December 26 options expiry highlights market divergence. Call options concentrate at $100,000 and $120,000 strikes, showing some investors still anticipate a year-end technical rebound. However, short-term dominance remains with puts heavily clustered around $85,000. STS Digital estimates $1.4 billion in open interest near this level could create a "gravitational pull" on spot prices before expiration.
Post-expiry, traders are monitoring two catalysts: hedging ahead of MSCI's January 15 decision potentially excluding crypto-heavy digital asset treasuries from its indices, and potential revival of call overwriting strategies. STS Digital CEO Maxime Seiler warns these flows may exacerbate downside moves while capping upside potential.
With Bitcoin down 23% year-to-date—heading for its worst quarter since Q2 2022 following the TerraUSD and Three Arrows Capital collapses—market sentiment remains fragile. BRN's Timothy Misir notes Bitcoin's failure to reclaim key technical levels has created a "fragile stalemate." Yet some traders haven't abandoned rebound bets entirely. Forster observes that while defensive positioning dominates, elevated volatility means upside tail risks persist as markets brace for a turbulent new year.
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