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Here's Real Reason Behind Bitcoin's New Year's Eve Pump

Fri, 12/31/2021 - 12:33
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Arman Shirinyan
Bitcoin gifts the market a $2,000 pump right before the New Year
Here's Real Reason Behind Bitcoin's New Year's Eve Pump
Cover image via stock.adobe.com

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Bitcoin has decided to make a great gift for the majority of the cryptocurrency market with a 3% flash pump that appeared on the market a few hours ago before press time.

The reason behind the pump

Some traders have assumed that the sudden buying power on the market appeared due to the technical recovery that was long awaited by an extremely oversold market.

Bitcoin Price
Source: TradingView

But the real cause lies in the December options expiry with a max pain price below $47,000. After the expiry, the next options contracts become the market's main tool for hedging positions, or "betting" on the next Bitcoin price in the specified period.

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Since Bitcoin tends to follow derivatives rather than tendencies on the spot market, options and futures contracts are two main determinants in the price formation process. The expiry of options, though, does not directly affect the price; instead, options' maximum pain price can act as a guideline for spot traders.

Bitcoin's New Year's Eve performance

At press time, Bitcoin is entering the year 2022 with a "green day" and an almost 3% price increase. But unfortunately for crypto investors, the largest cryptocurrency on the market has lost 30% of its value since the all-time high.

During the year, Bitcoin had multiple bear and bull cycles that led to both strong recoveries and corrections. As for now, Bitcoin trades at the levels of September, April and February.

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About the author

Arman Shirinyan is a trader, crypto enthusiast and SMM expert with more than four years of experience.

Arman strongly believes that cryptocurrencies and the blockchain will be of constant use in the future. Currently, he focuses on news, articles with deep analysis of crypto projects and technical analysis of cryptocurrency trading pairs.