On-chain data analytics firm Glassnode published an article on the X platform yesterday (19th) pointing out that the largest Bitcoin (BTC) options expiration event in history is about to take place, but the spot price of Bitcoin is currently still limited by the recent trading range and has not yet shown a clear direction. Glassnode believes that this options expiration will not only reset market positions, but may also become an important turning point affecting subsequent price behavior.
The market continues to price in downside risks.
Glassnode analysis indicates that participation in the Bitcoin options market has cooled significantly over the past month. Overall fund flows have become thinner, suggesting that market confidence in the short-term upward narrative is weakening. However, investors' need for downside protection remains, and demand for put options has not disappeared.
From a volatility perspective, implied volatility (IV) is declining across all maturities. This indicates a decrease in market demand for short-term safe-haven assets and upside leverage, suggesting that Bitcoin's price movement will remain within a relatively controlled range. Currently, at-the-money (ATM) implied volatility is around 44%, a drop of more than 10 volatility percentage points from recent highs, reflecting a more conservative market sentiment.
Regarding structural indicators, Glassnode points out that the 25-day skew remains in a positive range dominated by put options, meaning that put options are still priced higher than call options, and the market continues to price in downside risk. Such a skew structure typically does not appear in environments leading up to a "clean breakout."
Options trading still leans towards defensive operations.
Furthermore, arbitrage and volatility selling strategies remain the mainstream in the market. Glassnode stated that since the most recent Federal Reserve (FOMC) meeting, the 1-week volatility risk premium has remained positive, indicating that in the context of implied volatility convergence before the end of the year, the strategy of selling volatility to earn carry remains attractive and also helps to suppress actual price volatility.
Observing fund flows, options trading this week still leaned towards defensive operations, with put options accounting for a higher proportion of inflows than call options, even though the overall trading volume was not particularly high. Glassnode pointed out that market makers' current position structure is biased towards "long Gamma," and they will adjust through dynamic hedging when prices change. This mechanism may further suppress short-term volatility in the spot market before the end of the year.
Market volatility is expected to rise again in the new year.
In conclusion, Glassnode points out that with the rapid growth of the Bitcoin options market over the past year, the impact of options expiration and hedging mechanisms on prices has become increasingly critical. This record-breaking expiration event will completely reset market positions and market maker exposure structures, and after the position adjustments are completed, market volatility is expected to pick up again in the new year.
