Bitcoin has spent the majority of December pinned between $85,000 and $90,000. That range has been enforced by dealer hedging tied to heavy options exposure, with dips bought near $85,000 and rallies sold near $90,000. Some $27 billion of open interest are set to expire on Deribit with a strong call bias, and options mechanics point to a resolution toward the higher end as the more likely outcome. The key driver has been a heavy concentration of options around current prices.
Delta measures how much an option’s value changes for a $1 move in the bitcoin price. Gamma measures how quickly that delta changes as price moves. When gamma is high and close to spot, dealers are forced to buy and sell frequently, suppressing volatility. According to an account, in December, large put gamma near $85,000 acted as a floor, forcing dealers to buy bitcoin as the price dips.
At the same time, heavy call gamma near $90,000 capped rallies, with dealers selling into strength. This created a self-reinforcing range driven by hedging necessity rather than conviction. The max pain point, which refers to the price level at which options buyers would lose the most money at expiry and the sellers, typically dealers, would make the most, is at $96,000, which reinforces the upside skew. In addition, implied volatility measures the market’s expectation of how much bitcoin’s price may fluctuate in the future, and the Bitcoin Volmex implied volatility index hovering near one month lows around 45 suggests traders are not pricing in elevated near-term risk. More than half of Deribit open interest rolls off, with a put-call ratio of just 0.38 (that is, there are almost three times as many call options as puts) and most open interest concentrated in upside strike prices between $100,000 and $116,000.
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