Bitcoin faces a key test at the end of the year! About $23 billion worth of options contracts will expire next Friday, which could further amplify market volatility.

Bitcoin faced significant pressure in the last few weeks of 2025. The options market shows that around $23 billion worth of Bitcoin options contracts will expire next Friday, potentially amplifying market volatility on top of already high levels. This amount represents more than half of the total open interest on the world's largest Bitcoin options trading platform Deribit, reflecting traders pricing in continued downside risks. Recent market volatility has been unusually intense. During the U.S. trading session on Wednesday, the price of Bitcoin fluctuated by over $130 billion within an hour, triggering a cascade of liquidations for both long and short positions. At the same time, the total market capitalization of the entire cryptocurrency market has been fluctuating around the $3 trillion mark, indicating highly tense market sentiment. Nick Forster, founder of the digital asset trading platform Derive.xyz, stated that as the new year approaches, the market is still sliding, with prices in a fragile state at a "knife's edge." On Thursday, Bitcoin briefly rose by around 4%, reaching $89,430, but quickly retraced its gains, dropping below the $85,000 mark at one point, touching a low of $84,450.02. Compared to its all-time high of over $126,000 in early October, Bitcoin has experienced a cumulative decrease of nearly 30%. From an options structure perspective, market sentiment remains clearly bearish. Forster pointed out that the 30-day implied volatility of Bitcoin has risen to nearly 45%, while the options skew has been maintained around -5%, indicating a significantly higher demand for downside protection than upside bets. The longer-term skew also remains in negative territory, suggesting that traders are preparing for continued downside risks in the first and second quarters of 2026, especially against the backdrop of renewed selling pressure from previously dormant wallets. The positioning distribution around the December 26 options expiry date further highlights market divergences. Bullish options are mainly concentrated at strike prices of $100,000 and $120,000, implying that some investors still anticipate a technical rebound by the end of the year. However, the dominant force in the short term is bearish, with put options highly concentrated around the $85,000 mark. STS Digital estimates that the open interest contracts near this price level amount to around $1.4 billion, which may exert a "gravitational effect" on spot prices before the options expiry. Looking beyond the expiry date, traders are generally focused on two potential catalysts. One is hedging for the January 15 MSCI decision, which may result in the exclusion of digital asset treasuries companies with more than 50% allocation in crypto assets from its index system; the other is the potential resurgence of the call overwriting strategy. Maxime Seiler, CEO of STS Digital, stated that these fund flows could further amplify downside volatility while limiting upside price potential. Overall market sentiment remains fragile. Bitcoin has fallen approximately 23% since the beginning of the year and is heading towards its worst quarter performance since the second quarter of 2022. At that time, the successive collapses of TerraUSD and Three Arrows Capital had severely impacted the entire industry. Timothy Misir of BRN pointed out that Bitcoin has failed to reclaim key technical levels, leading the market into a "fragile sideways stalemate." Despite this, some traders have not completely abandoned bets on a rebound. Forster stated that the market's volatility remains high, overall positions are defensive, and the potential for upside tail risks has not completely disappeared, as the market prepares for a tumultuous start to the new year.