High volatility can be advantageous for option buyers, as it enhances the likelihood of options becoming “in-the-money” (profitable) before expiration, giving buyers the potential for gains. As Bitcoin (BTC) faces continued fluctuations, traders are forecasting that this may lead to a shift toward altcoins, especially with a major options expiry influencing the market during the upcoming festive week.
QCP Capital, based in Singapore, emphasized the importance of the massive options expiry this Friday, which will involve nearly $20 billion worth of BTC and ETH options. This represents about half of the open interest on Deribit, one of the largest crypto derivatives exchanges. “If Bitcoin continues to trade within its current range and options sellers roll their positions forward, we expect further volatility in the market,” QCP noted in a message on Tuesday. “Rolling” refers to traders extending their positions by moving to later expiration dates to maintain their market stance.
For option buyers, high volatility is a favorable condition, as it increases the probability of options turning profitable before expiration.
QCP also suggested that if Bitcoin struggles to break past the $100,000 mark, it could lead to a renewed interest in altcoins. This is similar to a trend seen a month ago when Bitcoin was at similar price levels, and the ether/bitcoin ratio bounced off a 0.032 support, triggering a rally in altcoins.
The crypto market tends to move in cycles, with Bitcoin often leading the charge, followed by altcoins as traders seek additional returns. This pattern frequently results in quick, substantial rallies in altcoins, driven by a flow of capital from Bitcoin into other digital assets.
Bitcoin is currently facing one of its worst Decembers, with a 2% drop over the past 30 days, undermining what is traditionally a bullish period for the asset. Hopes for a “Santa rally” — a price surge often seen in the holiday season — have been dampened by profit-taking and a more cautious mood after weeks of price fluctuations.
Some analysts are predicting further declines, as the U.S. Federal Reserve has indicated fewer rate cuts for the coming year while reinforcing its stance against state holdings of Bitcoin, with no intention to change this policy.
However, a pullback to the $90,000 level could present a buying opportunity, according to Alex Kuptsikevich from FxPro. In an email to CoinDesk, Kuptsikevich stated that while Bitcoin could potentially dip to the $70,000 range in a worst-case scenario, a pullback to $90,000 in the next few weeks seems more likely. He believes this level could attract buyers and stop the ongoing sell-off. Kuptsikevich also noted that markets are still processing the Federal Reserve’s more hawkish tone, along with a growing desire to lock in profits after a strong year for Bitcoin.
