Bitcoin’s $19.8 Billion Options Expiry Approaches: What’s at Stake for BTC Price?

The cryptocurrency market is gearing up for one of its largest options expiries in history, with a staggering $19.8 billion worth of Bitcoin options set to expire on December 27 at 8:00 AM UTC. As Bitcoin (BTC) hovers around the $100,000 mark following a meteoric rise, the battle between bulls and bears intensifies. The outcome of this expiry could significantly shape Bitcoin’s price trajectory as we head into 2025.

The Numbers Behind the Options Expiry

The options market shows a clear tilt in favor of bullish sentiment. Currently, the total open interest for call options (buy contracts) stands at $12 billion, while put options (sell contracts) lag behind at $7.8 billion. Market leader Deribit dominates with 72% of the total market share, followed by the Chicago Mercantile Exchange (CME) at 12% and Binance at 9%.

Bitcoin’s 68% surge over the past three months has caught bearish investors off guard, rendering a significant portion of put options ineffective. At current price levels, bulls are strategically better positioned to capitalize on the expiry.

Bulls Eyeing New All-Time Highs

The recent rally has emboldened Bitcoin bulls, who are targeting levels above $110,000 as the year-end approaches. However, optimism alone may not be enough to push BTC beyond this psychological barrier. Institutional demand, regulatory developments, and investor sentiment are the key factors driving the bullish momentum.

Key Bullish Developments

• Institutional Demand on the Rise

Bitcoin continues to attract institutional investors. Spot exchange-traded funds (ETFs) have recorded $4.5 billion in inflows during the first 12 days of December alone. Additionally, prominent players like MicroStrategy and MARA Holdings have made significant purchases:

• MicroStrategy: Acquired 21,550 BTC between December 2 and December 8 at an average price of $98,783 per Bitcoin.
• MARA Holdings: Purchased 11,744 BTC on December 10.

• Regulatory Momentum

The potential approval of a U.S. strategic Bitcoin reserve has also bolstered market sentiment. Proposed by Senator Cynthia Lummis, the reserve could aim to accumulate up to 1 million BTC over time, positioning Bitcoin as a critical national asset. Additionally, Texas lawmakers are pushing for similar legislation, proposing to hold Bitcoin as a reserve asset for at least five years without using taxpayer funds for acquisition.

• Bullish Market Scenarios

If Bitcoin’s price holds at approximately $100,500 at the time of the expiry, only $275 million worth of put options will retain value. This scenario effectively neutralizes bearish positions, as options to sell at $100,000 become worthless if BTC trades above that threshold.

Bears Struggle to Keep BTC Below $95,000

For bears, the goal is clear: drive Bitcoin’s price below $95,000 before December 27. Failure to achieve this would result in substantial losses, as the imbalance between call and put options grows more favorable for bulls at higher price levels.

Probable Expiry Scenarios

Below are five potential outcomes for Bitcoin’s price at expiry, along with the estimated profit imbalances based on current trends:

• Between $90,000 and $95,000: $4.6 billion in calls vs. $1.1 billion in puts, favoring calls by $3.6 billion.
• Between $95,000 and $100,000: $5.6 billion calls vs. $520 million puts, favoring calls by $5.1 billion.
• Between $100,000 and $105,000: $7.12 billion calls vs. $240 million puts, favoring calls by $6.9 billion.
• Between $105,000 and $112,000: $8.13 billion calls vs. $120 million puts, favoring calls by $8 billion.

For bears to avoid significant losses, they must suppress Bitcoin’s price below $95,000. Conversely, bulls could see substantial gains if BTC breaches $105,000, potentially reaching a new all-time high and maintaining bullish momentum into early 2025.

Institutional Adoption to Shape Bitcoin’s Future

Looking beyond the December 27 expiry, broader institutional adoption is expected to play a pivotal role in Bitcoin’s price dynamics. BlackRock, the world’s largest asset manager, recently suggested that a 2% portfolio allocation to Bitcoin is “reasonable” for diversified investors. Additionally, the increasing likelihood of regulatory approval for spot Bitcoin ETFs and growing interest from state governments could further solidify Bitcoin’s position as a mainstream asset.

What Lies Ahead for Bitcoin?

The upcoming $19.8 billion options expiry is more than just a milestone; it is a litmus test for Bitcoin’s resilience and the market’s broader sentiment.

While bulls are currently in the driver’s seat, the stakes are high as both sides seek to influence Bitcoin’s price in the final days of 2024.

Will the expiry fuel Bitcoin’s rise to new all-time highs, or will bears manage to regain control? With institutional interest and regulatory developments at an all-time high, the answer could set the tone for 2025 and beyond.