Bitcoin traded between $85,000 and $92,000 throughout December. The expiration of options on Friday, December 26 will probably shake things up.
QCP Capital noted in its latest US Color Market update that liquidity was decreasing as traders closed their positions ahead of the holidays.
This caused a drop in open interest for Bitcoin and Ethereum (ETH). A 5-7% price change towards the end of the year is expected due to options expirations towards the end of the year.
Friday’s record expiration was $23.7 billion, with approximately 300,000 BTC options contracts and 446,000 IBIT options contracts.
The Max Pain Point was $95,000, with a significant concentration of strikes at $100,000 and $85,000 as well. How will this affect the price action of Bitcoin (BTC)?
Analysts agree that Bitcoin should rebound soon
Source: Joao Wedson on X
In an article on X, Alphractal founder and CEO Joao Wedson highlighted current points of interest around Bitcoin. The Put/Call ratio is only 0.38 and the Max Pain Point has created strong short-term price gravity that would pull the price to $95,000.
Source: Joao Wedson on X
In another article, Wedson used liquidation levels to highlight his expectations.
Leveraged positions around $84,000 and $95,000 were clear on the heatmap and were the short-term price targets. BTC would likely drop to between $82,000 and $84,000 before recovering to $95,000 and possibly higher.
Another user, David, pointed out similar expectations. The analyst observed that the $90,000 level was a false ceiling and the $100,000 level was a structural magnet. The levels mentioned for the initial flush, between $80,000 and $82,000, were particularly interesting.
A move to $90,000 would be the trigger for the breakout.
QCP Capital noted that this rally may not be sustainable.
“…Holiday-related moves have historically tended to revert to the mean. Much like the weekend spikes of low liquidity that often return once markets reopen, Christmas week price action typically fades as liquidity returns in January.”
Price action over the holidays could be very volatile as thinbooks experience tax losses from crypto investors ahead of the December 31 deadline. These conditions can amplify short-term volatility rather than suppress it.
Final Thoughts
- Friday’s options expiration is the largest of the year (quarterly + annual), equivalent to $23.7 billion.
- Analysts suggest that a drop in BTC between $82,000 and $84,000 could be followed by a rally towards the maximum pain point at $95,000 when the options expire.
