Traders expect Bitcoin (BTC) turmoil to continue with a possible rotation towards altcoins, as the expiration of a major option weighs on market dynamics in the upcoming holiday week.
“All eyes are on this Friday’s massive expiration, where nearly $20 billion in BTC and ETH options will expire,” Singapore-based QCP Capital said in a message broadcast Tuesday morning. “This represents almost half of Deribit’s total OI. “We think it is very possible, especially if the spot price continues to fluctuate here and options sellers continue to place their short positions.”
“Rolling” means that instead of letting their options expire, traders roll their positions to later expiration dates. This is often done to keep the trade active if they still believe in their market forecast.
High volatility can be good for option buyers because it increases the chance that the option will be “in-the-money” at some point before expiration, generating profits for buyers.
“As BTC continues to struggle below 100k, we could also see alts start to catch up again,” QCP said, adding that a similar trend was seen a month ago when Bitcoin was trading at current price levels. . The ether/bitcoin ratio bounced off a support of 0.032 at the time, as reported, spurring the move in altcoins.
The cryptocurrency market often goes through cycles where bitcoin leads the charge, followed by altcoins. Investors taking advantage of new market gains seek additional returns, and a flow of capital into altcoins leads to wild rallies over short periods.
Bitcoin is currently enduring one of its worst December months yet, cushioning a seasonally bullish period with a 2% drop over the past 30 days. Hopes for a “Santa rally” – where the asset tends to soar in the holiday week – have taken a hit amid profit-taking and a cautious mood after weeks of price increases.
Some warn of further declines as the US Federal Reserve signaled fewer rate cuts for next year, while emphasizing that it bans state holdings of BTC and does not seek a change in the law to do so.
But a drop to the $90,000 level could mean new opportunities for market traders, FxPro’s Alex Kuptsikevich told CoinDesk in an email.
“In a possible shock scenario, bitcoin could suddenly fall to the $70,000 area. However, there is a better chance that a pullback to $90,000 in the next two weeks will be attractive enough for buyers to stop the sell-off,” Kuptsikevich said. “Markets continue to digest the Fed’s tougher tone, reinforced by the pent-up need to lock in profits after a strong year.”
