Open interest in BTC and ETH futures plummets by $5 billion, signaling market leverage reduction.
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Despite gold prices reaching record highs, Bitcoin continues to fluctuate within a range. Data shows that open interest in BTC perpetual futures contracts on major exchanges fell by approximately $3 billion overnight, while open interest in ETH perpetual futures contracts also fell by approximately $2 billion. This suggests that the market is undergoing a voluntary deleveraging (reducing leverage) rather than re-entry.
Due to reduced liquidity, the risk of a two-way squeeze during the holiday season remains high. Historically, Bitcoin has typically seen price fluctuations of 5-7% during the Christmas week, largely related to the concentrated year-end options expirations.
This Friday (the 27th) is scheduled for a major expiration. Approximately 300,000 BTC options contracts (worth approximately $23.7 billion) and 446,000 IBIT options contracts will expire. On Deribit, in particular, more than 50% of open interest contracts are concentrated on Boxing Day (the 26th), with key strike prices at $100,000 and $85,000, and the maximum loss point (Max Payne) near $95,000.
Recent data shows that open interest in $85,000 put options has decreased slightly, while open interest in $100,000 call options remains relatively stable. This reflects the market's continued, albeit limited, optimism about a "Christmas rally."
At the same time, the risk reversal indicator shows that although market fears have somewhat eased, overall it still shows a slightly bearish bias.
Our analysis suggests that in addition to option fund flows, year-end tax-loss harvesting selling could amplify short-term volatility in a low-liquidity environment.
However, historically, holiday season markets tend to revert to the mean after liquidity recovers in January. In the absence of a clear directional breakthrough, the cryptocurrency market is expected to remain within a range in the short term.
The potential for sharp price fluctuations persists, particularly with the low liquidity environment coupled with the expiry of $23.7 billion worth of BTC options this Friday. Investors should closely monitor price movements centered around the $95,000 Max Payne level and the potential return of institutional funds to the market in early January.
Joohoon Choi joohoon@blockstreet.co.kr
