The market is at a critical juncture at the end of the year. On the one hand, the largest-ever Bitcoin options contract is about to expire, which could trigger violent fluctuations; on the other hand, the macroeconomic environment, especially the direction of the Federal Reserve's policies, is putting additional pressure on the market.
VX: TTZS6308
$14 Billion Options Expiration
This Friday, $14 billion in Bitcoin options open interest (OI) will expire. The put-call ratio of the expiring contracts is 0.69, meaning there are 7 put options for every 10 call options. This indicates a certain degree of bearish sentiment in the market. Additionally, the number of contracts expiring (146,000) is significant, double the amount of the March 2025 expiration (73,000).
The expiring contracts account for 44% of the current total Bitcoin options open interest ($32 billion). It is estimated that over $4 billion in contracts will be executed, which will inevitably trigger a significant trading activity.
The Volatility Index (DVOL) has been experiencing violent fluctuations recently, indicating that traders still have significant disagreements about the future market trend.
The previously dominant bullish momentum is weakening, and the market is currently in a high-leverage upward state. If a significant decline occurs, it may trigger a rapid backlash effect. All eyes will be on the upcoming options expiration, as it may set the tone for the market's performance in 2025.
Crypto Fund Inflows Decline Sharply, ETFs See Record Outflows
Although crypto funds maintained net inflows last week, after the hawkish speech by Federal Reserve Chair Powell, crypto products experienced record single-day outflows, leading to a significant decline in inflows. Investors injected a total of $308 million into funds last week, including Bitcoin ETFs. However, on Thursday alone, investors withdrew a record $576 million, and the outflow increased to $1 billion on Friday.
Profit-Taking Remains the Core Factor for Corrections
In this cycle, whenever short-term investors' profit margins reach above 30%, the probability of a correction increases rapidly, until they sell their profits or the cost of continuous buying becomes too high, and the market then enters the next stage of evolution.
External changes also support the adjustment, supporting the main forces that have taken BTC adoption to the next level in this cycle: the Federal Reserve's rate cuts, the Trump effect, and MicroStrategy's BTC purchases have all passed their initial strong periods and entered a resting phase. Additionally, factors such as the Christmas holiday, which significantly impact BTC ETFs, have also contributed to the natural correction of BTC.
All of these factors are not short-term in nature, and in the long run, they will support the long-term development of BTC. Taking MicroStrategy as an example, on December 23, it will officially enter the NASDAQ 100 index, which will open the door for mainstream US funds to passively allocate to BTC.
Over the past week, capital inflows have shown a noticeable slowdown, and this trend may continue for 1-2 months. Correspondingly, the scale of selling by both long-term and short-term investors has also started to slow down, returning to the level before this round of upswing. With this balance, the probability of a volatile market increases.
During this period, if the capital side maintains a relatively net inflow state, and the cost of short-term investors further rises above $90,000, the space for the next major upward wave will be further opened.
The relative support level of this adjustment may be around $85,000 - the cost line of short-term investors, which is currently in a process of gradual increase.
Institutional Activity May Decrease, but Market Still Has Rebound Potential
The bulls should maintain Bitcoin's price at the $90,000 level by the end of the year, but if it falls below that level, it may trigger further liquidation.
Although crypto market trading activity may decrease in the remaining time this year, this does not mean that investors should give up hope for a "Christmas rally". With the expected decline in institutional activity and the anticipated low retail trading volume in the last two weeks, volatility should continue to decline. While the persistent negative momentum may lead to minor losses, the market still has the potential for a strong rebound.
Altcoins want to rise, they have to wait for BTC to fall. In the past few days, BTC's pullback has dragged Altcoins down, with Altcoins falling several points or even tens of points for every one-point drop in BTC. As of yesterday, BTC had fallen by more than two points, and most Altcoins are no longer following the decline, and BTC's market share has also decreased, which is a good thing.
Since Altcoins are not following the decline when BTC falls, it means they have reached a relatively bottom, and BTC cannot keep falling forever, it will also rebound. When BTC rebounds, Altcoins will rebound even more.
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