Throughout December, Bitcoin has remained largely confined within the $85,000 to $90,000 range, causing frustration among its investors. As U.S. equities gained momentum and gold prices reached record highs, the underlying mechanics of derivatives have played a crucial role in Bitcoin's price behavior.
Currently, a significant concentration of options exists around these price points. The dynamics of call and put options create a situation where price movements are influenced by the activities of options writers, who hedge their risks in both spot and futures markets. This hedging behavior is dictated by metrics known as gamma and delta. High gamma levels near current prices compel dealers to actively buy and sell, thereby curbing volatility.
With a notable $27 billion in options set to expire on December 26, the stabilizing effect of these derivatives is expected to diminish. The put-call ratio stands at 0.38, indicating a strong bullish outlook as more than half of the open interest on Deribit is concentrated on call options priced between $100,000 and $116,000. The max pain point is positioned at $96,000, suggesting potential upward price movement as expiry approaches.