The cryptocurrency market is bracing for a turbulent end to 2025, with Bitcoin facing intense pressure from a massive options expiry event. Data reveals that approximately $23 billion worth of Bitcoin options contracts are set to expire next Friday. This event, accounting for over half of all open interest on the leading platform Deribit, threatens to significantly amplify the already heightened volatility in the digital asset space.
Market on a Knife's Edge Ahead of Expiry
Market sentiment remains decisively bearish as traders price in continued downside risk. Bitcoin experienced extreme price swings recently, with moves exceeding $130 billion in value within a single hour during US trading on Wednesday. This triggered a cascade of liquidations for both bullish and bearish positions. Nick Forster, founder of digital assets platform Derive.xyz, described the situation, stating, "Markets continue to slide as we head into the New Year, with prices sitting on a knife's edge."
Bitcoin saw a brief rally on Thursday, jumping as much as 4% to $89,430, but it quickly erased those gains. As of Friday morning in Singapore, the cryptocurrency was trading around $85,465. This represents a steep decline of about 30% from its all-time high of over $126,000 reached in early October, putting it on track for its worst quarterly performance since the second quarter of 2022.
Bearish Signals and Key Price Levels
Analysts point to several indicators underscoring the negative outlook. "Bitcoin positioning remains decisively bearish. Thirty-day volatility has climbed back toward 45%, while skew hovers around -5%," explained Forster. The skew metric, which measures the relative cost of upside versus downside protection, indicates traders are paying more for bearish puts. This pessimistic pricing extends into the first half of 2026, suggesting expectations of ongoing sell pressure.
The positioning for the December 26th expiry clearly reflects the market divide. While some call options at strikes of $100,000 and $120,000 show residual optimism, the near-term picture is dominated by bears. A critical level to watch is $85,000, where a heavy concentration of put options exists. Analysis from STS Digital estimates this level holds roughly $1.4 billion in open interest and could act as a powerful "magnet" for the price as the expiry date approaches.
Catalysts and Fragile Sentiment for 2026
Looking beyond next week's expiry, traders are preparing for repositioning around two major events. The first is the January 15 decision by MSCI, which could remove digital-asset firms with high crypto holdings from its indexes, potentially triggering hedging activity. The second is a resurgence of call-overwriting flows. Maxime Seiler, CEO of STS Digital, noted, "Together, these flows should increase downside volatility while capping upside."
Overall sentiment remains fragile. Timothy Misir of BRN highlighted that Bitcoin's failure to reclaim key technical levels has left the market "trapped in a fragile holding pattern." Forster concluded that while defensive positioning and high volatility are the norm, markets have not entirely abandoned hope for a positive surprise, bracing instead for a volatile start to the new year.
