Bitcoin has recently disappointed both bullish and bearish markets, repeatedly fluctuating between $85,000 and $90,000 without a clear breakout. The cause of this phenomenon is not a lack of buying interest or macroeconomic headwinds, but the options market.
According to the derivatives data, the current dealer gamma exposure is showing that mechanical hedging flows are suppressing spot price volatility. Due to this structure, Bitcoin is trapped in a narrow price range. However, the force that has been holding the price is set to expire on December 26.
Gamma flip level
At the center of this market dynamic is a zone that traders refer to as the 'gamma flip' level. Currently, this level is positioned around $88,000.
Above this threshold, market makers holding short gamma positions must sell on the rise and buy on the decline to maintain delta neutrality. Such actions lower volatility and help revert prices to the central region.
Below the flip level, this mechanism works in reverse. Because dealers hedge in the same direction as price movements, selling pressure accumulates repeatedly, and volatility is not suppressed but rather amplified.
$90,000 continues to resist... $85,000 supports
The $90,000 level has repeatedly acted as a resistance line, with the reason being concentrated positioning in call options.
Dealers hold significant short positions in call options at the $90,000 strike price. As the spot price approaches this level, they must sell Bitcoin to hedge their exposure risk. This creates the appearance of a natural selling pressure, but in reality, it is forced selling due to derivatives hedging.
These hedging flows are triggered every time the price approaches $90,000, explaining why breakout attempts continue to fail.
In the event of a decline, $85,000 has served as a reliable support line by the same mechanism as above.
As put option positioning concentrates at this strike price, if the price drops to that level, dealers must buy spot Bitcoin. This forced demand absorbs selling pressure and prevents a sustained decline.
As a result, the market appears stable on the surface but is actually in an artificial balance state due to opposing hedging flows.
Futures liquidation, range strengthening
The option-centric range does not operate independently. According to the liquidation heatmap data provided by the cryptocurrency derivatives data platform Coinglass, leveraged futures positions are also clustered in the same price range, acting as an additional force reinforcing the $85,000 to $90,000 range.
Above $90,000, there is a buildup of large short liquidation zones. If the price breaks through this resistance, forced short position liquidations will lead to a cascade of buy orders. Conversely, if it drops below $86,000, there is a concentration of long liquidation zones, which could accelerate the decline as leveraged long positions are liquidated. Currently, both the option dealer hedging and futures liquidation mechanisms are aligned, exerting structural pressure to keep Bitcoin trapped at its current price level.
The December 26 option expiration is expected to be the largest in Bitcoin's history, with an estimated nominal value of $23.8 billion set to expire.
For comparison, the total annual expiration amounts were approximately $6.1 billion in 2021, $11 billion in 2023, and $19.8 billion in 2024. This sharp increase indicates that institutional investors are increasingly participating in the Bitcoin derivatives market.
According to analyst NoLimitGains, about 75% of the current gamma profile will disappear after this expiration. The mechanical force that held prices in the range of $85,000 to $90,000 will effectively vanish.
Dealer gamma, ETF fund flow overwhelms
Currently, the scale of dealer hedging activities overwhelms spot market demand. According to data cited by analysts, dealer gamma exposure is about $507 million, while daily ETF trading is only $38 million, resulting in a ratio of about 13 to 1.
This imbalance explains why Bitcoin has remained unresponsive despite clear bullish signals. Until the excessive influence of the derivatives market is alleviated, the mathematical structure of dealer hedging is more important than the narrative from institutional viewpoints.
What direction will Bitcoin take after the option expiration?
Once the December 26 expiration passes, the suppression mechanism will end. While it does not guarantee a specific direction, Bitcoin will be free to move.
If the bulls can defend the $85,000 support line well until expiration, a breakout above $100,000 becomes structurally possible. Conversely, if $85,000 breaks in a low gamma environment, the decline may accelerate.
Traders should expect high volatility until early 2026 as new positioning will be formed. The price movements within the range over the past few weeks are merely a temporary phenomenon stemming from derivatives mechanics and do not reflect the market's fundamental conviction.
