Bitcoin falls before the end of the year, massive bullish options expire today, Binance reserves plummet
The Bitcoin market is currently facing multiple challenges. On one hand, institutional investors like Microstrategy continue to buy heavily, injecting confidence into the market; on the other hand, the upcoming massive options expiration may trigger short-term volatility. Additionally, the sharp decline in Binance's Bitcoin reserves suggests that Bitcoin prices may rise
As 2024 comes to a close, the Bitcoin market is facing a critical moment, with a large-scale options expiration today and a sharp decline in Binance's Bitcoin reserves.
On Thursday, Bitcoin experienced a pullback after three consecutive days of gains, with the price dropping 3.4% to $95,110, following a record high of $108,000 on December 17. Additionally, cryptocurrency indices, including Ethereum, Solana, and Dogecoin, also fell by about 3.5%.
In response, Zaheer Ebtikar, founder of the cryptocurrency fund Split Capital, stated:
This is a mixed result of year-end and holiday risk reduction. The market is hovering around the $100,000 mark, and it seems that large funds are satisfied with this level, preparing to conclude trading for the year.
Currently, the Bitcoin market is facing multiple challenges. On one hand, institutional investors like MicroStrategy continue to buy heavily, injecting confidence into the market; on the other hand, the upcoming massive options expiration could trigger short-term volatility. Furthermore, the sharp decline in Binance's Bitcoin reserves suggests that Bitcoin prices may rise.
MicroStrategy Continues to Increase Bitcoin Holdings
Despite the price pullback, MicroStrategy Inc. (MSTR) announced on Monday evening plans to expand its Bitcoin purchasing program. The company holds over $40 billion in Bitcoin, making it the largest Bitcoin holder among publicly traded companies.
Sean McNulty, trading director at Arbelos Markets liquidity provider, stated:
The market is looking forward to MicroStrategy's Bitcoin purchases, which is one of the biggest reasons for the market's rise. Keeping an eye on MicroStrategy news has become an important part of my daily work.
According to a filing submitted to the U.S. Securities and Exchange Commission on December 23, MicroStrategy is seeking to increase the authorized share count for Class A common stock and preferred stock. This move will provide the company with more financial support to continue accumulating Bitcoin. Earlier this week, MicroStrategy announced the additional purchase of $561 million in Bitcoin at an average price close to last week's record high, marking the company's seventh consecutive week of purchases.
Massive Options Expiration May Trigger Market Volatility
As the year-end approaches, some traders are warning that the market may experience volatility in the coming days due to the massive open interest in Bitcoin and Ethereum derivatives set to expire.
According to media reports, on December 27, Bitcoin will face an options expiration day worth $14.27 billion, with the largest open interest at a strike price of $90,000. Data from the derivatives exchange Deribit, which accounts for 72% of the Bitcoin options market, shows that the open interest for call options is $8.45 billion, while the open interest for put options is $5.82 billionData shows that Deribit will face a record $43 billion in open contracts expiring on Friday, including $13.95 billion in Bitcoin options and $3.77 billion in Ethereum options.
Sean McNulty stated:
Market makers may close their hedging positions and short positions in Bitcoin, which could make the market volatile on Friday.
Regarding the impact of options expiration on Bitcoin prices:
If Bitcoin prices remain above $95,000: Call options with a strike price of $90,000 will remain "in the money," and holders may choose to exercise them, creating buying pressure. Market makers may need to buy Bitcoin in the spot or futures market to cover their exposure, which could put short-term upward pressure on prices.
If Bitcoin prices fall below $90,000: Call options with a strike price of $90,000 will become "out of the money," potentially causing these options to lose value. Put option holders may choose to exercise, which could increase selling pressure and exacerbate Bitcoin's downward momentum.
Binance Bitcoin Reserves Plummet
Changes in Bitcoin reserves have also drawn market attention, as Binance, the world's leading cryptocurrency exchange, saw its Bitcoin reserves drop to the lowest level since January this year, raising expectations that Bitcoin prices could surge significantly.
Earlier this month, as Binance's reserves fell to around 564,000 coins, Bitcoin's price first broke the $100,000 mark, after which reserves began to rise slightly and Bitcoin's price started to decline.
According to research by CryptoQuant analyst Darkfrost, Binance's Bitcoin reserves have dropped to 570,000 coins, and this downward trend is similar to the situation earlier this year when Bitcoin prices soared to nearly $70,000.
Darkfrost pointed out that the decrease in Binance's reserves indicates that investors are confident in Bitcoin's long-term prospects, choosing to withdraw their holdings from the exchange rather than leaving them there for short-term sales. This view suggests that the market may be brewing a bullish trend