Record-Breaking BTC and ETH Options Settlement Reshapes Market Dynamics

A significant derivatives event recently concluded on Deribit, where 146,000 bitcoin options contracts valued at nearly $14 billion expired, marking a watershed moment for BTC and the broader crypto options market. This settlement represented 44% of the total open interest across all BTC options on the exchange—the largest expiration event in Deribit’s history. Simultaneously, ETH options worth $3.84 billion settled, adding substantial pressure to ethereum’s market structure. With Deribit commanding over 80% of the global crypto options market, this event carried outsized implications for price discovery and market sentiment across digital assets.

The scale of this settlement underscored just how leveraged the market had become heading into the expiry window. The episode provided crucial insights into market positioning, risk concentration, and the mechanics of how derivative expirations influence spot prices.

BTC Options Settlement and the Leverage Trap

As the settlement occurred, approximately $4 billion worth of BTC options expired in-the-money (ITM)—representing 28% of the total $14 billion open interest—creating immediate profit-taking opportunities and potential position rollovers. Market participants commonly shifted their exposure into subsequent expiry dates (January 31 and March 28), which served as the nearest liquidity anchors for the new year. This rolling mechanism, while providing continuity, introduced fresh volatility vectors into the market structure.

The put-call open interest ratio of 0.69 revealed a pronounced skew toward bullish positioning, with call options significantly outnumbering puts. This asymmetry meant leveraged upside exposure dominated the expiry, amplifying the vulnerability of bullish traders to downside corrections. The complication, however, stemmed from BTC’s momentum deterioration. Following the Federal Reserve’s December decision—where Chairman Jerome Powell ruled out potential Fed cryptocurrency purchases and signaled fewer rate cuts for 2025—bitcoin’s rally lost steam.

At the time of the settlement, BTC had declined over 10% to $95,000 from previous peaks. Current data shows BTC trading at $68.45K with a 24-hour gain of +4.53%, indicating partial recovery but well below the previous cycle highs. Traders carrying leveraged bullish positions faced magnified losses, and mass liquidations risked triggering cascading sell-offs. As Deribit’s Chief Executive Officer Luuk Strijers remarked, “The previously dominant bullish momentum has stalled, leaving the market highly leveraged to the upside. This positioning increases the risk of a rapid snowball effect if a significant downside move occurs.”

ETH’s Declining Fortunes Amid Market Volatility

While BTC captured most attention, ETH demonstrated markedly weaker positioning ahead of and during the settlement. Ethereum had dropped nearly 12% to $3,400 prior to the options expiry, and current pricing reflects continued pressure at $2.07K—though showing a 24-hour rally of +8.03%. This rebound, however, fails to reverse the broader weakness in ETH sentiment.

Options pricing metrics revealed the divergence starkly. Volatility smile analysis—a graphical representation of implied volatility across different strike prices—showed BTC’s smile remaining largely unmoved between settlement days, while ETH’s implied volatility for call options declined significantly. This drop signaled reduced demand for bullish ETH bets, pointing toward subdued confidence in ethereum’s price trajectory. The put-call skew ratio for ETH reached 2.06% in favor of puts, substantially more bearish than BTC’s neutral 1.64% skew toward calls.

Andrew Melville, research analyst at Block Scholes, synthesized these observations: “After more than a week of poorer spot performance, ETH’s put-call skew ratio is more strongly bearish compared to BTC. Overall, end-of-year positioning reflects a moderately less bullish picture than we saw going into December, but even more starkly for ETH than BTC.”

Market Uncertainty and Forward-Looking Volatility

The settlement period highlighted an unexpected phenomenon: despite massive options expiry, directional clarity remained elusive. Volatility-of-volatility (vol-of-vol) metrics—measuring fluctuations in volatility itself—registered elevated levels, indicating heightened sensitivity to news flow and economic data. This translated into rapid swings in pricing and aggressive hedging by sophisticated traders, as participants struggled to establish conviction about near-term directional movement.

“The much-anticipated expiry is poised to conclude a remarkable period for the bulls. However, directional uncertainty lingers, highlighted by heightened volatility of volatility,” Strijers noted, capturing the paradox: a record options expiry had occurred amid profound ambiguity about market direction.

The settlement event demonstrated that even massive derivatives expirations, while influential in creating technical pressure points, cannot override the fundamental market uncertainty arising from macro policy shifts and shifting asset sentiment between BTC and ETH.