'It Will Hurt Even More'. How Experts See Bitcoin's Future After the Collapse

Experts predict more volatility in the Bitcoin market at the end of the year.

The weekly Bitcoin (BTC) price correction of almost 9 per cent, which ended on 22 December, was the largest since the end of August 2024. Andre Dragos, head of research at the European division of the management company Bitwise, quoted by Coindesk, believes that the macroeconomic situation in the US could lead to a further decline in the leading cryptocurrency. However, the expert believes that any downward movement in Bitcoin could represent a good buying opportunity.

Last week, the price of Bitcoin fell by about 9 per cent, to $95.2 thousand. On Monday 23 December, the price of BTC recovered slightly and is trading around $96.2 thousand, according to Coinmarketcap.

The correction coincided with Federal Reserve Chairman Jerome Powell's speech and the reduction of the US benchmark interest rate. On 18 December, the decision was made to cut the rate by 25 basis points, after which Powell expressed the view during a press conference that the pace of interest rate cuts will slow down next year.

Powell also did not support the idea of creating a national reserve in the major cryptocurrency, which is being actively promoted by US President-elect Donald Trump. Following his statement, experts noted a possible weakening of investors' expectations regarding Bitcoin's growth by the end of the month.

"The overall macroeconomic picture sees the Fed stuck between a rock and a hard place as financial conditions continue to tighten despite three consecutive rate cuts since September. Meanwhile, real consumer price inflation has accelerated again, reaching new highs in recent months," Dragos said.

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Dragos noted that there is a high probability that the situation will worsen in the coming weeks: "Most likely it will be even more painful. However, it could be an interesting buying opportunity given the current headwinds related to the shortage of bitcoin supply."

One of the main features of bitcoin is its limited issuance. This distinguishes it from traditional currencies and assets, for which inflation is a given. Investors around the world use this feature as one of the main arguments for Bitcoin's attractiveness over other assets.

For example, analysts at BlackRock, the largest asset management company, call Bitcoin a new asset with "unique demand factors" due to its properties as an alternative monetary instrument and its limited supply of 21 million BTC. They also argue that Bitcoin's share, long shunned by large investors, is now expected to represent 1 to 2 per cent of traditional investment portfolios.

According to David Lovant, head of research at cryptocurrency broker FalconX, quoted by the SCMP, the most likely scenario is an unstable price dynamic before the rally resumes.

The expert also highlighted the largest cluster of cryptocurrency options contracts expiring on 27 December.

Lovant said that "a low liquidity environment could lead to higher volatility in the final days of the year, especially as cryptocurrencies are likely to face the largest options expiration event in history on 27 December."

According to data from Deribit, the largest cryptocurrency options trading platform, the total notional value of contracts on Bitcoin expiring on 27 December exceeds $14 billion as of 23 December.

According to Greg Magadini, director of derivatives at Amberdata, clusters of options contracts around a particular Bitcoin price could indicate that traders are hedging their exposure at certain levels. For example, many contracts in the range of $90,000 to $100,000 and above, expiring on 27 December, were sold to dealers. This means that participants are buying Bitcoin when their bearish position creates risk and selling when their bullish position creates risk of capital loss.