Bitcoin (BTC) is on track for a potentially dramatic year-end as the cryptocurrency's options market is set to experience a massive $11.8 billion expiry on December 27, 2024, at 8:00 am UTC. With Bitcoin’s price having surged by 29% since October, all eyes are now on how the outcome of this options expiry could influence market sentiment and push Bitcoin’s price even higher into the New Year. Here’s a closer look at the current Bitcoin options landscape and what to expect as we approach this pivotal moment.
As the expiration date for Bitcoin’s options contracts draws near, the market is showing a distinct preference for call (buy) options. Open interest for Bitcoin call options has soared to $7.9 billion, significantly outpacing the $3.92 billion in open interest for put (sell) options. This imbalance indicates that a large number of traders are betting on Bitcoin's continued price appreciation, with many anticipating the potential for further gains into 2025.
The preference for call options reflects Bitcoin’s strong upward movement in recent months. Since breaking the $80,000 barrier, Bitcoin has caught many bearish traders off guard. The options market is now dominated by major players such as Deribit, which holds a commanding 74% market share, followed by Chicago Mercantile Exchange (CME) and Binance, both holding around 10.3%, while OKX holds a mere 4.3%.
Despite the overwhelming dominance of call options, bears are not giving up without a fight. To mitigate losses from the surge in call option values, Bitcoin's price would need to fall below $75,000 before the expiry date. This price level is critical, as it marks the point where a significant portion of the options market rests between $75,000 and $80,000.
If Bitcoin remains above $75,000 as the expiry date approaches, it could push the value of put options (bets on price declines) toward zero, cementing the bullish sentiment in the market. For example, if Bitcoin hovers around $88,000 on December 27, the value of puts drops drastically, with only about $96 million in put options still in play—significantly limiting the impact of bearish positions.
Given the large volume of call options, several price levels by the expiry date will likely result in substantial payouts for call option holders. Below are key price ranges, the corresponding open interest, and the expected outcomes:
Beyond technical market factors, the political landscape in the United States is adding another layer of optimism for Bitcoin’s price. President-elect Donald Trump's recent victory has sparked investor optimism, particularly regarding his promises to ease regulations on the cryptocurrency sector. Trump’s stance, which includes potential moves to replace U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler, has been welcomed by many in the crypto industry, who have criticized Gensler’s tough regulatory approach.
Additionally, the recent surge in pro-crypto lawmakers in the U.S. Congress further strengthens this bullish sentiment. Senator Cynthia Lummis, a vocal Bitcoin advocate, introduced legislation that could lead to the U.S. government amassing a “strategic Bitcoin reserve” of up to 1 million BTC over time. Such initiatives are likely to add to the positive outlook for Bitcoin, especially in the lead-up to the options expiry.
For Bitcoin bulls, the ideal scenario would be a continued upward surge in the cryptocurrency’s price, possibly pushing it past the $90,000 mark by the expiry date. If Bitcoin reaches this level, call option holders would stand to gain substantially, with a net advantage of more than $4.4 billion over put option holders. This scenario would not only mark the end of a bullish year but could also set the stage for further gains into 2025, extending the overall bullish trend in the market.
As we head into December, the $11.8 billion Bitcoin options expiry is shaping up to be a pivotal moment for the cryptocurrency market. The strong preference for call options, coupled with the growing optimism surrounding Bitcoin’s price and the political landscape, suggests that the cryptocurrency could continue to climb through the end of 2024 and into the New Year.
With the growing imbalance in open interest favoring the bulls, it is likely that Bitcoin will remain above the $75,000 level, consolidating bullish sentiment and setting the stage for further gains. As the expiry date approaches, all eyes will be on Bitcoin’s price movement. Will it rally even higher, or could we see a dramatic correction? The outcome of this major options expiry could determine the next major direction for Bitcoin in 2025.
November 2024, Cryptoniteuae