From the all-time high to the recent one-month low, Bitcoin has experienced a rollercoaster ride in the past week.
Just less than a week ago, the price of Bitcoin broke through $108,000, setting a new all-time high, but in the past 24 hours, its price has fallen below $92,500, reaching the lowest level since November 26.
Over the past week, Bitcoin has fallen by about 13%, Solana and XRP have fallen by 18% and 15% respectively, and meme tokens like MEME have seen a 22% drop.
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 volatility; on the other hand, the macroeconomic environment, especially the policy direction of the US Federal Reserve, is putting additional pressure on the market.
Options Worth $14 Billion to Expire
This Friday, Bitcoin options contracts worth $14 billion in open interest (OI) will expire. According to data released by Deribit exchange CEO Luuk Strijers, the ratio of put options to call options in this expiring contract 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 quite large, double the amount of the March 2025 expiry (73,000).
Strijers further explained that the expiring contracts account for 44% of the total Bitcoin options open interest of $32 billion. Deribit exchange expects over $4 billion of these contracts to be exercised, which will inevitably trigger a lot of trading activity.
Deribit's volatility index (DVOL) has been experiencing violent fluctuations recently, indicating that traders still have significant divergences in their views on the future market direction, according to Strijers.
Strijers emphasized: "The previously dominant bullish sentiment is weakening, and the market is currently in a highly leveraged upward state. If a significant decline occurs, it may trigger a rapid reversal effect. All eyes will be on the upcoming options expiry, as it could set the tone for the market's trajectory in 2025."
Crypto Fund Inflows Plunge Sharply, ETFs See Record Outflows
Although crypto funds maintained net inflows last week, after dovish comments from US Federal Reserve Chair Powell, crypto products experienced record single-day outflows, leading to a sharp decline in inflows.
CoinShares data shows that investors injected a total of $308 million into funds last week, including Bitcoin ETFs. But on Thursday alone, investors withdrew a record $576 million, and on Friday, the outflow increased to $1 billion.
Institutional Activity May Decline, But Market Still Has Rebound Potential
In a report, FalconX research head David Lawant wrote that in the short term, price volatility remains the most likely scenario before a "bullish trajectory" emerges in the first quarter of 2025. Arbelos Markets trading head Sean McNulty believes: "Bulls should keep Bitcoin at the $90,000 level until the end of the year, but if it falls below that level, it could trigger further liquidation."
According to MarketWatch data, the "Santa Claus rally" typically occurs in the last five trading days of the year and the first two trading days of the new year.
BRN analyst Valentin Fournier said that while crypto market trading activity may decline in the remaining time this year, this does not mean investors should give up hope for the "Santa Claus rally". In a report on Monday, he wrote: "With the expected decline in institutional activity and retail trading volume expected to remain subdued in the last two weeks, volatility should continue to decline, and while the persistent negative momentum may lead to minor losses, the market still has the potential for a strong rebound."
