Bitcoin faces a crucial test at the end of the year! Approximately $230 billion worth of options contracts will expire next Friday, potentially further amplifying market volatility.

Bitcoin faces 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, possibly amplifying market volatility on top of the already high levels. This volume represents more than half of the total open interest of Bitcoin options on the world's largest platform Deribit, indicating that traders are pricing in continued downside risk. Recent market volatility has been extremely high. During the U.S. trading session on Wednesday, the price of Bitcoin fluctuated by over $130 billion in just one hour, triggering liquidations of long and short positions. At the same time, the total market capitalization of the entire cryptocurrency market has been fluctuating near the $3 trillion mark, showing highly tense market sentiment. Nick Forster, the founder of digital asset trading platform Derive.xyz, stated that as the new year approaches, the market is still declining, with prices in a fragile state where they are "on a knife-edge." On Thursday, Bitcoin briefly rose by around 4%, reaching $89,430, but quickly gave back the gains, dropping below the $85,000 mark at one point, reaching a low of $84,450.02. Compared to the all-time high of over $126,000 in early October this year, Bitcoin has experienced a cumulative decline of nearly 30%. From the perspective of options structure, market sentiment remains significantly bearish. Forster pointed out that the 30-day implied volatility of Bitcoin has risen to almost 45%, and the skew of options remains around -5%, indicating a clear demand for downside protection over bullish bets. The longer-term skew also remains in negative territory, indicating that traders are preparing for continued downside risks in the first and second quarters of 2026, especially in the backdrop of previously dormant wallets re-emerging with selling pressure. The positions surrounding the expiry date of December 26 further highlight market divergence. Bullish options are mainly concentrated at strike prices of $100,000 and $120,000, suggesting that some investors still expect a technical rebound by the end of the year. However, the dominant force in the short term is bearish, with put options concentrated at around $85,000. STS Digital estimates that the size of open interest contracts near this price point is approximately $1.4 billion, which may have a "gravitational effect" on spot prices before the options expire. Looking beyond the expiration, traders are generally focused on two potential catalytic factors. One is the hedging for the MSCI decision on January 15, which may lead to the exclusion of digital asset treasury companies with a portfolio allocation of over 50% in crypto assets from its index system; the other is the potential reactivation of the call overwriting strategy for bullish options. STS Digital CEO Maxime Seiler stated that these fund flows may further amplify downward volatility while limiting upward price movement. Overall market sentiment remains fragile. Bitcoin has fallen by around 23% so far this year, heading towards its worst quarter since the second quarter of 2022. Back then, the successive collapse of TerraUSD and Three Arrows Capital had severely affected 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." Nevertheless, some traders have not completely given up on betting on a rebound. Forster mentioned that the current market volatility remains high, overall positions are defensive, and the tail risk of an upside movement has not completely disappeared, as the market prepares for a turbulent start to the new year.