Market participants anticipate that bitcoin’s volatility will persist, potentially leading to a shift in investor attention towards alternative crypto currencies, as the upcoming expiration of major options contracts influences trading activity during the holiday-shortened week.
Singapore-based QCP Capital mentioned in a message on Tuesday a significant expiration event is approaching this Friday, involving nearly $20 billion in BTC and ETH options. This amount accounts for almost half of the total open interest on Deorbit. The message also suggested that the expiration event may likely occur, particularly if the spot price remains within the current range and option sellers keep extending their short positions.
“Rolling” refers to the practice of extending the expiration dates of options instead of allowing them to expire. Traders typically do this to maintain an active trade when they continue to have confidence in their market prediction.
Increased volatility is advantageous for those purchasing options as it raises the likelihood of the option being profitable before expiration, resulting in gains for buyers.
QCP mentioned that if Bitcoin remains below 100k, alternative crypto currencies may show a resurgence. They noted a similar occurrence a month ago when Bitcoin was trading at its current price. During that time, the ether/bitcoin ratio rebounded from a support level of 0.032, leading to increased activity in alternative crypto currencies.
Market cycles in the crypto currency industry typically involve bitcoin taking the lead, with altcoins following suit. Investors who have recently made profits in the market look for more opportunities to increase their returns, resulting in a shift of funds towards altcoins that can cause sudden and significant price surges.
This December has been particularly dismal for Bitcoin, defying its typical end-of-year upward trend with a 2% decline over the past month. Expectations of a year-end surge, often referred to as a “Santa rally,” have been tempered by investors cashing in their gains and adopting a cautious stance following a period of volatility.
There are concerns about more drops ahead as the U.S. Federal Reserve indicated fewer interest rate reductions for the upcoming year. At the same time, the Fed made it clear that it does not allow states to hold BTC and has no intention of trying to change the law to allow it.
A decline to the $90,000 mark could potentially revive favorable conditions for market traders, according to FxPro’s Alex Kuptsikevich, who shared his insights with Coin Desk via email.
Kuptsikevich mentioned that if there is a sudden event, bitcoin might drop around $70K. Yet, it is more likely that a decline to $90K in the coming weeks will appealing to buyers, halting the selling trend. The markets are still processing the Federal Reserve’s more assertive stance, further encouraged by the growing desire to secure gains following a successful year.
