Sure! Here’s a rewrite of the content while keeping the HTML tags intact:
The value of Bitcoin has largely remained within the range of $85,000 to $90,000 throughout December, against a backdrop of rising U.S. stocks and gold hitting record levels. This situation has left investors in Bitcoin feeling unsatisfied, with the reasons rooted in derivatives mechanics.
Currently, these mechanics suggest that the leading cryptocurrency may be positioned for a breakout towards the upper limit of this range. Post-expiry, the more probable result seems to be an upward movement towards the mid $90,000s rather than a sustained drop below $85,000.
A significant factor driving this has been a high concentration of options at current price levels. Options are contracts that give traders the option, but not the obligation, to buy or sell Bitcoin at a predetermined price. When prices increase, call option holders benefit, while put options profit when prices decline.
On the opposite side of these options trades, we have the writers who must fulfill the contracts if the holders choose to exercise them. They manage their risk dynamically in both the spot and futures markets, a process governed by metrics known as gamma and delta.
Delta gauges how much an option’s value adjusts for a $1 change in Bitcoin’s price. Gamma, on the other hand, indicates how quickly that delta shifts as the price fluctuates. When gamma is high and close to the spot price, dealers are compelled to frequently buy and sell, which mitigates volatility.
As noted by David’s X account, during December, significant put gamma near the $85,000 mark acted as a support, necessitating that dealers purchase Bitcoin during price declines. Concurrently, substantial call gamma around $90,000 limited price increases, with dealers selling into uptrends. This resulted in a self-perpetuating trading range driven more by hedging requirements than by market confidence.
As $27 billion worth of options near expiry on December 26, the stabilizing influence of gamma and delta declines.
This expiry is notably substantial and carries a bullish undertone. Over half of Deribit’s open interest will roll off, with a put-call ratio of just 0.38 (indicating nearly three times the number of call options compared to puts) and most of the open interest heavily weighted in strike prices ranging from $100,000 to $116,000.
The max pain point describes the price level where options buyers experience the greatest losses at expiry, while sellers—typically dealers—profit the most, which is set at $96,000, reinforcing the positive skew.
Additionally, implied volatility reflects the market’s predictions regarding the potential price movement of Bitcoin going forward, and with the Bitcoin Volmex implied volatility index resting near one-month lows of approximately 45, it indicates that traders are not anticipating elevated risks in the near term.
Feel free to let me know if you need any further adjustments!
