Bitcoin Price Braces for Whipsaw as Record $23B Options Expiry Threatens 2026 Volatility Spike

Key Insights:

• Bitcoin options worth $23 Billion set to expire on December 26 in the largest-ever expiry event.
• Implied volatility compressed to 44% across tenors as year-end positioning turned defensive.
• Post-expiry volatility is expected to spike as traders reposition ahead of January catalysts.

Bitcoin price entered the final weeks of 2025 under mounting pressure as approximately $23 billion in Bitcoin (BTC) options contracts were set to expire on December 26.

The record expiry threatened to amplify volatility heading into 2026, with traders positioning for significant price swings once year-end hedging mechanics reset.

Glassnode highlighted on December 19 that spot Bitcoin remained trapped in its recent range despite the massive options expiry approaching.

The combination of slowing participation, compressed volatility metrics, and defensive positioning suggested markets braced for contained price action through year-end before turbulence returned in January.

Options activity cooled over the past month, with flows appearing lighter than in previous periods. The slowdown signaled lower conviction behind bullish narratives, though demand for put protection persisted.

This created a defensive posture in the options market, even as Bitcoin price held above key support levels.

Bitcoin Price: Volatility Metrics in Focus for Near-Term Action

Implied volatility for Bitcoin price declined across the curve, indicating weaker demand for near-term hedges and upside leverage. Markets priced more contained price behavior as 2025 wound down.

At-the-money implied volatility sat around 44% across tenors, down by more than 10 volatility points from recent highs. The compression in implied volatility reflected year-end dynamics where volatility sellers earned carry as IV declined.

The one-week volatility risk premium remained positive since the latest FOMC meeting, favoring sellers who collected premium while hedging flows kept realized moves contained.

Twenty-five delta skew remained in put territory, meaning puts traded richer than calls. The positive skew indicated downside risk was priced into Bitcoin options markets.

This pattern differed from the skew structure typically seen ahead of clean breakout attempts, where call demand would push skew negative.

Options flow leaned toward puts this week, though volumes remained modest. Dealer positioning appeared long gamma heading into year-end, which mechanically suppressed spot volatility.

Long gamma positions required dealers to rebalance hedges by buying into weakness and selling into strength, dampening Bitcoin price swings.

Record Bitcoin Options Expiry to Reset Market Structure

The December 26 expiry represented the largest Bitcoin options expiry event on record. The reset would clear existing positioning and dealer exposure, fundamentally altering hedging mechanics that kept volatility contained through December.

The Bitcoin options market has grown sharply over the past year, making hedging mechanics increasingly important for understanding spot price behavior. As contracts expired and positions rolled forward, the mechanical suppression of volatility was expected to lift.

Traders anticipated volatility would pick up after the New Year as new positioning established itself. Two specific catalysts loomed in January that threatened to inject fresh turbulence into Bitcoin price action.

The first catalyst centered on a January 15 MSCI decision that could eject digital-asset treasury firms from its indexes. MSCI proposed removing companies whose cryptocurrency holdings exceeded 50% of total assets from its indexes, directly targeting firms like Strategy.

Strategy slammed the proposal as discriminatory, arguing the 50% threshold unfairly penalized companies with Bitcoin treasury strategies. The potential index ejection created uncertainty for these firms’ stock prices and could force repositioning in related Bitcoin hedges.

Traders expected increased hedging activity ahead of the MSCI decision as treasury companies and their stakeholders prepared for potential volatility. This hedging demand would emerge just as the December 26 expiry cleared existing positions, potentially amplifying Bitcoin price swings.

The second catalyst involved renewed call-overwriting flows expected in January. Call overwriting strategies, where investors sell call options against Bitcoin holdings to generate income, had provided steady selling pressure on upside volatility throughout 2024.

As positions reset after the expiry, new call-overwriting programs were anticipated to launch.

These flows could cap Bitcoin’s upside initially. However, if spot prices push through concentrated strike levels where traders sold calls, it might also create conditions for sharp moves.

The interaction between call-overwriting supply and any renewed buying demand threatened to produce whipsaw action.

Defensive Positioning Dominates Year-End

The combination of put-heavy flow, compressed implied volatility, and positive skew suggested defensive positioning. Markets anticipated Bitcoin price to remain range-bound through the December 26 expiry, with participants showing limited appetite for aggressive directional bets.

Carry trades dominated as volatility sellers collected premiums from elevated implied volatility levels that exceeded realized moves.

This dynamic kept options markets structurally short volatility heading into the expiry, setting up potential for sharp repricing if actual volatility spiked.

Dealer long gamma positioning through year-end provided mechanical support for contained Bitcoin price action. Once the expiry cleared and gamma positions reset, this stabilizing force would diminish.

The combination of expiring hedges, new catalyst-driven positioning, and reduced dealer gamma created conditions for elevated volatility in early 2026.

Bitcoin price behavior in January would depend heavily on how aggressively traders repositioned after the December 26 reset.

The MSCI decision and call-overwriting flows represented concrete catalysts that could trigger volatility. Still, the underlying market structure after the record expiry would determine whether moves proved sustained or short-lived.