Bitcoin's $24B Options Expiry: Will it Break the $85K-$90K Range?
Bitcoin has been confined within a narrow range of $85,000 to $90,000, causing frustration among both bullish and bearish investors. The options market is largely responsible for this stagnation.
Understanding the Gamma Flip
The "gamma flip" level, currently around $88,000, is pivotal in this scenario. Above this level, market makers holding short gamma positions must engage in hedging activities that suppress volatility and maintain price stability. Conversely, below this threshold, hedging intensifies volatility.
Resistance at $90K, Support at $85K
The $90,000 level has repeatedly acted as a resistance due to concentrated call option positions, forcing dealers to sell Bitcoin to hedge their positions. This creates apparent sell pressure. On the other hand, $85,000 serves as support due to heavy put option positions requiring dealers to buy Bitcoin, which prevents price breakdowns.
Impact of Futures Liquidations
Data from Coinglass indicates that futures liquidations further reinforce this range. Above $90,000, significant short positions are vulnerable, while below $86,000, long positions face liquidation risks. These factors, combined with options dealer hedging, maintain Bitcoin's current trading range.
Approaching Options Expiry
The upcoming options expiry on December 26 is poised to be the largest in Bitcoin's history, with nearly $24 billion in notional value. This event could dissolve the forces keeping Bitcoin in its current range, potentially leading to increased volatility.
Dealer Gamma vs. ETF Flows
Dealer gamma exposure significantly outweighs spot market demand, overshadowing ETF activity. This imbalance has prevented Bitcoin from responding to positive market indicators. However, once the options expiry passes, Bitcoin may experience freer price movement.
Future Outlook
Post-expiry, Bitcoin's price could either break out toward $100,000 if bulls defend $85,000, or it could decline if it falls below this support. Traders should prepare for increased volatility as new market positions are established.