## Pressure on Bitcoin Option Expiry $23 Billion: Volatility Now Compressing, Turbulence Expected in 2026

**News Summary:** Bitcoin options contracts worth $23 billion will expire on December 26 in the largest event in derivatives market history. Implied volatility has decreased to 44% across various tenors as market participants adopt defensive positions. After restructuring hedge positions, analysts anticipate a spike in volatility as traders update their positions ahead of January 2026.

Bitcoin price currently stands at $95.45K, down 2.14% in the last 24 hours, reflecting selling pressure as the industry prepares for the largest options expiry on record. This New Year approach brings complex market dynamics, where investors and traders simultaneously manage the unwinding of old positions and prepare new investment strategies.

### **Market Demand Curve Shows Defensive Sentiment Rather Than Attacking**

Options market metrics depict a clear picture of participant sentiment. At-the-money implied volatility has fallen more than 10 points from its recent peak, settling around 44%. This arrangement reflects activity by volatility sellers collecting premiums while realized movements remain controlled.

The 25-delta skew continues to favor puts, meaning investors are trading higher-priced put contracts compared to calls. This phenomenon indicates that downside risk is already priced into the Bitcoin market demand curve, creating a cautious atmosphere among market operators.

Options trading volume shows a cooling trend throughout December. Flows lean toward put buying, albeit with moderate intensity. This dynamic suggests waning confidence behind the bullish narrative, even as demand for protective instruments persists with somewhat weak strength.

### **Long Gamma Posture Presses Price Activity Toward Year-End**

Long gamma positions held by traders have a significant mechanical impact on Bitcoin market dynamics. Holders of these positions are forced to hedge by buying on dips and selling on rallies, limiting substantial price movements.

This explains why Bitcoin remains trapped in a narrow range despite the approaching large expiry. This mechanical pressure is expected to sharply diminish after the contracts expire on December 26, when long gamma positions are unwound and traders must restart their hedging activities with different fundamentals.

The combination of slow participation and compressed volatility metrics suggests the market expects to remain within a contained range until the end of this year, before more fundamental shifts occur at the start of next year.

### **January Catalyst: MSCI and Call-Overwriting Programs Pose Change Risks**

Two specific factors will be key drivers for Bitcoin price movements in early 2026. The first catalyst centers on MSCI’s decision scheduled for January 15. This index organization proposes to exclude firms whose digital asset holdings exceed 50% of their total assets.

This proposal has sparked heated debate, with firms like Strategy condemning the decision as discriminatory. If approved, it could trigger a major restructuring of Bitcoin hedge strategies related to those firms.

The second catalyst involves the renewal of the call-overwriting program expected to begin in January. This strategy, where investors sell call contracts against their holdings to generate income, has exerted consistent selling pressure throughout 2024. New flows are expected to restart once the market structure is refreshed after the December 26 expiry.

If the spot price moves through key strike levels, the situation could turn into sharp and surprising (whipsaw) movements, adding further uncertainty for market participants.

### **Further Analysis: One-Week Implied Volatility and Carry Trade Dynamics**

One-week implied volatility remains positive since the latest FOMC meeting, providing opportunities for volatility sellers to collect profitable premiums. Carry trading dominates market dynamics, where profits are accumulated from the spread between high implied volatility and lower realized price movements.

This condition maintains a structurally short volatility market heading into expiry. Sharp re-pricing potential exists if actual volatility spikes dramatically after December 26.

This short volatility approach is a double-edged sword. While it offers short-term gains for volatility sellers, it also accumulates imbalances that could trigger significant volatility surges when hedging mechanics are unwound.

### **Pre-Expiry Strategies and Post-December 26 Volatility Expectations**

Defensive positions dominating the options market reflect participant caution. Most traders expect Bitcoin to remain within a range until the end of December, with limited appetite for aggressive directional bets. This posture provides a foundation for changing conditions once expiry occurs.

After restructuring and gamma positions shift, the mechanical stabilizing force will weaken. The combination of expiring hedges, new catalyst-driven positions, and reduced gamma creates ideal conditions for increased volatility in early 2026.

Bitcoin price behavior in January will largely depend on how aggressively traders unwind their positions after restructuring. MSCI’s decision and call-overwriting flows are concrete catalysts, but the underlying market structure will determine whether movements prove sustained or are merely short-term.

Market participants should prepare for increased volatility and more erratic price movements as hedging structures are reconfigured and January catalysts begin to attract market attention.