High volatility can benefit option buyers by increasing the likelihood that the option will become “in-the-money” (profitable) at some point before expiration, generating potential profits for buyers. With Bitcoin (BTC) expected to experience continued price fluctuations, traders anticipate a potential shift toward altcoins, particularly as a significant options expiry impacts market dynamics during the upcoming festive week.
Singapore-based QCP Capital highlighted the upcoming expiry on Friday, which will involve nearly $20 billion in BTC and ETH options. This represents nearly half of the open interest on Deribit, the leading crypto derivatives exchange. “If Bitcoin continues to trade within its current range and options sellers keep rolling their shorts forward, it’s quite likely we could see some major movements,” QCP said in a broadcast message on Tuesday. “Rolling” refers to traders shifting their positions to later expiration dates rather than letting their options expire, allowing them to keep their trade active if they remain confident in their market forecast.
For option buyers, high volatility is often advantageous as it increases the chances of the option being profitable, creating an opportunity for significant gains before expiration.
QCP Capital also noted that as Bitcoin struggles to break above $100,000, there could be a renewed interest in altcoins. A similar trend occurred a month ago when Bitcoin was at similar price levels, causing the ether/bitcoin ratio to bounce off a support level of 0.032, which led to altcoin rallies.
The cryptocurrency market tends to experience cycles where Bitcoin leads the way, followed by altcoins as traders seek to maximize returns from new market gains. This often results in rapid, short-term rallies in altcoins as capital flows from Bitcoin into other digital assets.
Bitcoin is currently enduring one of its worst Decembers, with a 2% drop over the past 30 days, dampening what is typically a seasonally bullish period. Hopes for a “Santa rally” — where Bitcoin typically sees a surge during the festive week — have been weakened by profit-taking and a cautious market sentiment following several weeks of price fluctuations.
Some analysts are predicting further declines as the U.S. Federal Reserve signals fewer rate cuts for next year and reiterates its stance against state holdings of Bitcoin, with no intention to seek a change in the law.
However, a drop to the $90,000 level could present a buying opportunity, according to Alex Kuptsikevich of FxPro. He told CoinDesk in an email that, while Bitcoin could potentially dip to the $70,000 range in a shock scenario, there is a greater likelihood of a pullback to $90,000 in the coming weeks. This level, Kuptsikevich believes, would be attractive enough to halt the sell-off and draw in buyers. He added that the market is still processing the Federal Reserve’s more hawkish stance, combined with a strong urge to lock in profits after a positive year.
