Bitcoin has largely remained range-bound in the $85,000 to $90,000 area for the better part of December, much to the frustration of traders who saw other assets, such as stocks and gold, record new highs. The reason for this range-binding is certainly not a lack of interest and conviction behind Bitcoin.
The current market at around $86,900 has been purely options positioning. Significant open interest positions have made it such that $85,000 has acted more of a support while the $90,000 zone has acted more of a top. Every pullback to support has been met with support, while advances have been sold almost mechanically.
The answer to this question lies in the hedging activities of the options dealers. When there are high volumes of calls and puts at prices close to the market, dealers are compelled to buy and sell bitcoin as they move with market price changes, which affects market volatility. The answer to this question lies in the hedging activities of the options dealers. When there are high volumes of calls and puts at prices close to the market, dealers are compelled to buy and sell bitcoin as they move with market price changes, which affects market volatility. The reason lies in the hedging activities of the options dealers. When there are high volumes of calls and puts
This is all about to change.
There are about $27 billion worth of bitcoin options expiring on Dec. 26. More than half the Deribit open interest is about to roll off. The positioning is heavily biased towards the bullish side, with many more call options traded compared to puts. The call-to-put ratio of 0.38 shows how strongly the market believes prices will increase.
As maturity nears, the influence of dealer hedging acts to counteract this effect. Gamma and delta values decline, reducing the need to continually adjust in the spot market. Without this influence, prices can react more freely to market demand and economic conditions.
What's more, the market for options itself is also pointing higher. In fact, the so-called "max pain level" is close to $96,000, which is an area where the sellers of options profit most in an expiring contract. Although not an analysis, this indicates the bias toward the upside, which is part of the current market positioning. Nonetheless, the volatility level is quite low, close to the record lows in the past month, resting at 45.
While equities remain strong, hard assets continue to hike, and year-end positioning is a concern, bitcoin now has a higher outlook towards resolution than stagnation. After the options cycle, the least-resistant path now increases towards the upper side of the chart instead of breaking below $85,000. However, if the range finally breaks, December might be a period that will be remembered not as a frustrating month but as the anticipation before the bitcoin makes its next move.
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