Bitcoin Lull Could Accelerate Altcoin Rally, $90K Considered an ‘Attractive’ Buying Area

High volatility can be good for option buyers because it increases the likelihood that the option will be "in-the-money" (profitable) at some point before expiration - creating a profit for the buyers.

What to know:

Traders expect Bitcoin (BTC) to continue its decline and circulate into altcoins.

Bitcoin is currently going through one of its worst months of December, down 2% in the last 30 days, undercutting a seasonally bullish period.

But a drop to the $90,000 level could provide a new opportunity for market traders.

Traders expect Bitcoin (BTC) to continue its decline with circulation into altcoins, as major options expirations over the upcoming holiday weekend weigh on market dynamics.

“All eyes are on the massive expiration this Friday, where an estimated $20 billion in BTC and ETH options will expire,” Singapore-based QCP Capital said in a broadcast message early Tuesday. “This represents almost half of the total OI on Deribit. We believe it is quite possible, especially if spot stays in the range here and as option sellers continue to roll out their shorts.”

“Rolling” means that rather than letting their options expire, traders move their positions to later expiration dates. This is often done to keep the trade active if they still have confidence in the market forecast.

High volatility can be good for option buyers as it increases the likelihood that the option will be “in-the-money” (profitable) at some point before expiration – creating profits for buyers.

“As BTC continues to struggle below 100k, we may see Alts start to catch up again,” QCP said, adding that a similar trend was seen a month ago when Bitcoin was trading at current price levels. According to the report, the Ether/Bitcoin ratio had bounced below the 0.032 support at the time, leading to a surge in altcoins.

Crypto markets often go through cycles in which Bitcoin leads the charge, followed by altcoins. Investors riding on fresh market gains look for additional returns, and capital flows into altcoins lead to wild short-term bull runs.

Bitcoin is currently going through one of its worst December months on record, with a 2% decline over the past 30 days, curtailing a seasonal bull run. The prospect of a holiday weekend rally in assets — amid profit-taking and cautious sentiment following price increases — has dashed hopes of a “Santa rally.”

Some are warning of further declines as the US Federal Reserve has signaled a small rate cut for next year, while stressing that it is restricting state holdings of BTC and does not intend to change the law to do so.

But a drop to the $90,000 level could present a new opportunity for market traders, Alex Kuptsikevich of FxPro told CoinDesk in an email.

“In a potential shock scenario, Bitcoin could suddenly plunge into the $70K region. However, a drop to $90K in the next two weeks is more likely to be attractive enough for buyers to stop selling,” Kuptsikevich said. “Markets are digesting the Fed’s hawkish tone through a cumulative desire to lock in profits after a strong year.”