[Analysis] "Bitcoin continues in a trading range amid year-end liquidity void…options expiry and tax-loss selling as variables"

Bitcoin (BTC) is continuing a trading-range movement amid year-end liquidity contraction, and an analysis said options expiries and tax-loss selling are variables.

On the 23rd (local time), global crypto trading firm QCP Capital said in a report, "Bitcoin is trading within a narrow range ahead of Christmas," and "as market participants reduced risk ahead of year-end, the perpetual futures open interest for Bitcoin and Ethereum decreased by about $3 billion and $2 billion, respectively."

The report continued, "Leverage has been reduced, but because liquidity has thinned, the possibility of short-term sharp moves has actually increased. This vulnerability coincides with a large options expiry scheduled for the 27th," and explained, "This Boxing Day option expiry accounts for more than 50% of Deribit's total open interest." Open interest on $85,000 put options has been gradually decreasing, but $100,000 call option positions remain in place, leaving limited hopes for a year-end Santa rally.

Aside from options, year-end tax-loss selling was pointed out as a variable. QCP warned, "Selling for tax-saving purposes ahead of December 31 could increase short-term volatility." It explained that in the year-end market environment where trading volume decreases, prices can react sharply even to relatively small sell orders.

However, QCP added that price movements occurring during year-end market closures have in past cases mostly shown reversion. Unless a clear breakout signal appears, the crypto market is likely to continue its trading-range movement through year-end, with the direction likely to be reformed as liquidity recovers in January.