Bitcoin Faces Critical Turning Point: How the $23B Option Expiry Will Change Market Dynamics in 2026

When Bitcoin reaches a price of $90.49K with a 0.38% increase in the last 24 hours, the market is craving a decisive moment. On December 26, Bitcoin options contracts worth $23 billion will expire— the largest event in derivatives market history. This massive reset will mark the end of the stabilization mechanism that has suppressed volatility throughout December, opening the door to greater turbulence in early 2026.

Underlying Market Structure Moving Toward a Critical Point

Throughout the final weeks of 2025, the Bitcoin options market has shown a clear defensive pattern. Glassnode reports that at-the-money implied volatility is around 44% across tenors—down more than 10 points from recent highs. This compression is no coincidence; it results from carry trading dominating the market, where volatility sellers collect premiums while actual price movements remain contained.

The market demand curve shows a notable defensive pattern. The 25 delta skew remains in put territory, meaning investors price in higher downside risk than upside potential. Long gamma positions by traders mechanically push price changes—buying on weakness and selling on strength—creating a dampening effect that keeps Bitcoin within a narrow range.

Option volume remains modest, reflecting cautious sentiment. Although flows tend toward puts, overall activity has decreased compared to previous months, indicating limited confidence behind the ongoing bullish narrative.

First Trigger: MSCI Decision on January 15 Will Spark Uncertainty

The first reason for rising uncertainty comes from MSCI’s decision on January 15. The index provider has proposed removing firms with crypto holdings exceeding 50% of total assets—a threshold explicitly targeting companies like Strategy. If accepted, this will force a large-scale portfolio rebalancing for institutional stakeholders.

The potential removal from the index has become a source of stock price uncertainty for Bitcoin treasury firms. Traders and digital asset holders are preparing hedges ahead of this decision. Once the December 26 expiry clears existing positions, demand for hedging is expected to rise significantly, creating hidden price pressures.

Second Trigger: Reintroduction of Call-Overwriting Programs

The second trigger for uncertainty relates to the anticipated renewal of call-overwriting strategies in January. Throughout 2024, this technique—where investors sell call options against Bitcoin holdings to generate income—has provided a steady flow of selling during upward price movements.

After the December 26 expiry, new programs are expected to launch. Initially, this will limit Bitcoin’s upside potential. However, if the spot price breaks through strike levels filled with call sellers, it will create a whipsaw dynamic—sharp, unpredictable movements as hedges are rapidly unwound.

Transition from Suppression to Uncertainty: What Happens After December 26

The combination of long gamma positions and implied volatility compression has kept Bitcoin within a range through the end of the year. Once expiry occurs, this stabilizing mechanism will quickly disappear. Rebalanced positions will seek new levels; MSCI triggers and call-overwriting will boost hedging demand; and the diminishing gamma of traders will remove mechanical support.

The underlying market structure post-reset will determine whether Bitcoin faces continued movement or short-term increased volatility. Implied uncertainty is expected to spike in January as traders unwind positions and concrete catalysts emerge ahead.

Looking Ahead: Higher Volatility in the Future

The best-case scenario for carry traders is for volatility to remain suppressed until the end of the year, allowing them to collect premiums unimpeded. However, deep market structures suggest this is unlikely to persist beyond January. MSCI decisions and call-overwriting flows represent concrete triggers that could initiate more decisive price movements.

Once the $23 billion positions are cleared, the market will enter a new phase. Traders should prepare for increased volatility and more aggressive moves as Bitcoin reacts to January catalysts and broader rebalancing.