On December 26, the cryptocurrency market witnessed an unprecedented event as Bitcoin options worth nearly $23.6 billion and Ethereum options valued at $3.8 billion settled on Deribit, marking the largest monthly options expiry in history. This significant event tested the market”s stability during a period characterized by thin liquidity.
As Bitcoin traded in the range of $85,000 to $90,000, market participants observed a brief dip below $87,000 before stabilizing around $87,500. In contrast, Ethereum experienced a more pronounced decline, dropping over 2% to approximately $2,950. The sheer scale of the expiry heightened market sensitivity, with low liquidity conditions due to year-end festivities making price movements more volatile.
Typically, market makers engage in a practice of hedging their exposure by buying Bitcoin during price dips and selling during rallies. This approach serves to mitigate directional risk, resulting in a constrained price movement often seen near the max pain level. Throughout December, this strategy kept Bitcoin fluctuating between $85,000 and $90,000.
However, once the options expired, the hedging pressure lifted, allowing for the potential return of volatility. Following the expiry, traders anticipated broader price movements as Bitcoin began to trade based on organic supply and demand dynamics. Additionally, in thin markets, algorithms may trigger stop-loss orders by pushing prices downward.
The prevailing low liquidity also raises downside risks, as significant orders can lead to rapid price shifts with fewer market participants. Despite these risks, historical trends indicate that January often welcomes new capital influxes, which could support price increases. Furthermore, derivatives expiries tend to yield neutral to bullish outcomes over time, minimizing the chances of extended price declines post-settlement.
Currently, Bitcoin is trading near $87,100, reflecting short-term pressure rather than any underlying structural weakness. Traders are closely monitoring whether Bitcoin can reclaim the critical $90,000 threshold. A sustained movement above this level could indicate renewed upward momentum, while failure to break through could prolong the period of consolidation.
In conclusion, the December options expiry removed a significant technical burden from the market. As we move into early 2026, traders may expect clearer direction as volatility resurfaces and fresh liquidity flows into the market.
