Bitcoin Rally Loses Momentum as Market Prepares for Crypto Derivatives Expiry

December 27, 2024 11:00 AM AEDT | By Team Kalkine Media

Bitcoin Rally Loses Momentum as Market Prepares for Crypto Derivatives Expiry — Image source: shutterstock

Bitcoin Faces Pressure as Rally Stalls and Derivatives Expiry Looms

Bitcoin, after reaching new heights last week, is showing signs of losing steam as market participants reflect on the recent surge and brace for the expiry of key crypto derivatives. The world’s largest cryptocurrency, which had surged to unprecedented levels, is now struggling to maintain its position as the year draws to a close.

Bitcoin's Struggle for Traction Amid Market Shifts

As of Friday morning in Hong Kong, Bitcoin was trading at $95,600, retreating nearly 3% from the previous day. Smaller cryptocurrencies, such as ether and dogecoin, have also faced challenges in maintaining upward momentum. The market’s recent volatility follows a record-setting performance, with Bitcoin reaching all-time highs just days earlier.

Despite the initial enthusiasm surrounding Bitcoin’s growth, market participants are now evaluating the future catalysts behind this rally. Much of the recent optimism had been driven by the positive stance of US president-elect Donald Trump, who has expressed support for a crypto-friendly environment in the United States. Trump has also proposed the idea of establishing a national Bitcoin reserve, although traders are still waiting for more clarity on the feasibility of such a stockpile.

Expiry of Bitcoin and Ether Derivatives Contracts Creates Market Uncertainty

In addition to shifting investor sentiment, the crypto market is preparing for the expiry of a large volume of bitcoin and ether options contracts. This event, anticipated to be one of the largest in digital asset history, is likely to contribute to a "choppy" market, as described by Sean McNulty, director of trading at liquidity provider Arbelos Markets. The expiration of these derivatives has the potential to cause market fluctuations as traders reposition their holdings, adding another layer of uncertainty to the market.

MicroStrategy's Role and the Broader Market Outlook

Despite Bitcoin's wavering performance, MicroStrategy, the US-based business intelligence company that has transitioned into a major Bitcoin holder, has hinted at the possibility of expanding its purchases. The company, which has accumulated more than $40 billion in Bitcoin assets, has drawn attention for its strategy of converting corporate reserves into the digital currency.

While the firm’s involvement continues to draw interest, Bitcoin’s price action is currently under pressure, with traders remaining cautious as they assess the broader market landscape. The coming days, particularly the expiry of derivatives, could shape the trajectory of Bitcoin as investors monitor developments surrounding Trump’s crypto policy and any potential shifts in the US regulatory landscape.

Navigating a Tumultuous Crypto Market

As Bitcoin faces challenges in sustaining its record-breaking rally, the market enters a period of uncertainty with the impending expiry of significant derivatives contracts. With external factors such as regulatory developments and market volatility playing a role, traders and market participants are exercising caution. The next steps for Bitcoin and other digital assets will depend on how these dynamics unfold in the coming weeks.

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