The cryptocurrency market is facing growing headwinds, with analysts bracing for a spike in volatility. According to Reuters, investors in Bitcoin, the world’s largest cryptocurrency, are anticipating a strong pullback. A bearish reversal seems likely after BTC failed to reach an all-time high of $100,000.
In late November, Bitcoin hit a record high of $99,327. Since then, however, the leading cryptocurrency has struggled to regain momentum. In fact, the cryptocurrency dropped by more than 8%, hitting a one-week low of $90,911 on November 26.
This year, the flagship cryptocurrency has soared by a staggering 120%. In the final month of autumn, Bitcoin gained another 34%, fueled by Donald Trump's election victory and crypto-friendly lawmakers in the US Congress. Trump, a known supporter of digital assets, has vowed to make the United States the "crypto capital of the world" and build up a national stockpile of BTC.
However, the current situation is far from rosy. Nick Forster, founder of Derive, an on-chain options DeFi protocol with total trade volume of $7.1 billion, pointed out that the so-called call-put skew index for the upcoming Bitcoin expiry soon showed a significant drop of 30% in daily transactions. This is attributed to waning interest from market participants, many of whom are fleeing to safe-haven assets.
"It suggests traders are hedging against potential downside risks," Forster said, adding that such pullbacks are "not uncommon in bull markets."
Investors are awaiting the upcoming expiration of $11.8 billion in Bitcoin options scheduled for December 27, which is a potential catalyst for significant price moves in either direction.
Forster estimates that there is a 68% chance of sharp price swings, with Bitcoin potentially either falling by 16.03% to $81,493 or rising by 19.9% to $115,579. However, there is a slim 5% chance that the first cryptocurrency could make more dramatic moves: plummeting by 29.49% to $68,429 or soaring by 41.83% to an impressive $137,645.
