$23 billion options expire next Friday! Bitcoin volatility intensifies, with $85,000 becoming the battleground for bulls and bears

The Bitcoin market is currently overshadowed by an options expiration event totaling up to $23 billion, which undoubtedly adds significant uncertainty to an already tense year-end rally. The scale of this expiration accounts for roughly half of the total open interest on the largest options trading platform Deribit. Coupled with weak technical patterns and a complex macroeconomic background, Bitcoin’s price remains “on thin ice” above the critical support level of $85,000.

Despite generally cooling global inflation data, market sentiment remains defensive, with put options at the $85,000 level accumulating approximately $1.4 billion in risk exposure, potentially “sucking” the price toward that level. Analysts point out that after the options expiration, the market will also need to contend with new catalysts such as the MSCI index rebalancing early next year. High volatility may become the main theme of the year-end trading.

Options Whale Dominance: How the $23 Billion Expiration Could Disrupt the Market

As the year draws to a close, an unprecedented options expiration event is becoming a “Damocles sword” hanging over the Bitcoin market. Data shows that about $23 billion worth of Bitcoin options contracts will expire on December 26 (next Friday), accounting for more than half of Deribit’s total open interest. Such a massive concentration of expiring contracts often intensifies price volatility in the spot market before the deadline, as traders adjust their spot holdings to hedge or optimize gains and losses from their options positions.

The current structure of the options market clearly reflects traders’ cautious mindset. Nick Forster, founder of digital asset trading platform Derive.xyz, notes that Bitcoin’s “skew” (the relative cost of call versus put options) remains stable around -5%. A negative skew indicates that the market is willing to pay higher costs to hedge against downside risk (buying puts) than to pursue upside gains (buying calls), which is seen as a defensive posture. Looking at the distribution of strike prices, call options are mainly concentrated around $100,000 and $120,000, leaving a glimmer of hope for a year-end “rebound”; meanwhile, a large volume of put options are stacked at the $85,000 level. Digital asset trading firm STS Digital estimates that this level has about $1.4 billion in open interest, making it a strong “magnet” for price.

December 26 Bitcoin options expiration key data and market impact

Expiration size: approximately $23 billion, over half of Deribit’s total open interest.

Market sentiment indicator (skew): around -5%, indicating investors are more concerned about downside risk and are in a defensive stance.

Key put option cluster: $85,000, with about $1.4 billion in open interest, forming a strong support/resistance level.

Key call option clusters: $100,000 and $120,000, reflecting residual upside expectations.

Potential impact: may amplify spot volatility before expiration, with $85,000 becoming a battleground for bulls and bears.

Technical Analysis: Bear Flag Formation Confirmed, $85,000 Support Under Pressure

From the price chart, Bitcoin’s outlook is also not optimistic, with technical patterns resonating with the market’s bearish sentiment. On the daily chart, Bitcoin has confirmed a “bear flag” downward breakout. This is a typical trend continuation pattern that appears after a sharp decline (from the October high of $126,000) and during a consolidation phase, with the downward breakout usually signaling the resumption of the prior downtrend.

Currently, Bitcoin is hovering around $85,600, closely hugging the recent support zone between $85,000 and $85,100. However, each rebound in this area appears weak, indicating more a depletion of buying power rather than panic selling. More critically, the price remains firmly below two key moving averages: the 50-day exponential moving average (EMA, around $94,500) and the 100-day EMA (around $100,100). Both are trending downward, forming a dynamic resistance zone overhead. As long as the price cannot effectively reclaim these averages, any upward attempt may face heavy selling pressure. The Relative Strength Index (RSI) is in the 30s, suggesting the market is not yet oversold but buying momentum is weak, leaving room for further decline.

Macro and Market Structure: New Catalysts After Inflation Cooling

Although recent inflation data from Europe and the US shows encouraging signs of cooling—such as the US November CPI YoY increase of only 2.7%, below the expected 3.1%—this has not provided a strong boost to Bitcoin. This indicates that the factors influencing prices have shifted from simple macro liquidity expectations to more complex internal market structures and specific event catalysts.

After the options expiration, traders expect the market to reposition around new catalysts. The most critical is the MSCI index review decision scheduled for January 15, 2026. Maxime Seiler, CEO of STS Digital, notes that if MSCI decides to remove digital asset treasury companies (DATs) with over 50% crypto asset exposure from its indices, it could trigger a targeted hedge sell-off. Additionally, the flow of funds into “call overwriting” strategies—where investors sell call options against their spot holdings to earn premiums—may re-engage, creating natural selling pressure on the upside. Seiler summarizes: “These flows, combined, could increase downward volatility while limiting upward potential.”

Market Outlook and Trading Strategy: Finding Balance Amid Volatility

Overall, the Bitcoin market is at a delicate juncture where short-term risks are intensifying, but the long-term narrative remains intact. The quarter has seen about a 23% decline, potentially marking the worst quarter since Q2 2022 (during the TerraUSD and Three Arrows Capital collapses). The combination of options expiration, weak technicals, and upcoming MSCI decisions forms a potent downside risk profile. If the $85,000 key support ultimately fails, the next key level to watch is $83,000, with the bearish flag’s target around $80,600.

However, market pessimism is not entirely unreserved. Nick Forster notes that “upside tail risks have not been completely abandoned,” implying that the market still retains some potential for unexpected rallies. For traders, the current strategy should involve distinguishing timeframes: short-term traders need to be highly alert to the potential for sharp volatility around options expiry and the $85,000 level, with strict stop-losses to avoid overexposure in uncertain “knife-edge” conditions. Long-term investors, on the other hand, may find opportunities if prices are driven down to the $80,000 region due to short-term pressures, based on macro logic such as Bitcoin’s long-term value, Fed rate cuts, and ongoing spot ETF adoption. In a volatile market, patience and discipline are more important than ever.