Bitcoin hovers around $87,000: Bank of Japan's rate hike did not trigger the expected safe haven, and next week's $23 billion options expiration significantly increases risk

The Bank of Japan raised interest rates as scheduled on Friday by 25 basis points to 0.75%, reaching a 30-year high. The market anticipated this could trigger yen arbitrage unwinding and chain risk hedging, but the actual reaction was muted — the yen indeed weakened, while Bitcoin instead rose to around $87,000. According to the latest data, BTC is currently priced at 87.70K, with a 24-hour increase of 0.19%.

Why Didn’t the Rate Hike Trigger a Risk-Off?

The reason is that the market had already priced in this decision in advance. More importantly, although the Bank of Japan raised interest rates, the real interest rate (adjusted for inflation) remains in negative territory, and the overall monetary policy tone remains accommodative. In contrast, US interest rates are still significantly higher than Japan’s, insufficient to trigger large-scale yen arbitrage unwinding.

This dispels many concerns. Previously, industry observers warned that yen appreciation could trigger chain liquidations, potentially sparking a risk-off wave across global risk assets. The actual trend shows that these fears were exaggerated.

However, Bitcoin’s rebound space is limited. As of press time, BTC has retreated from the intraday high of $89,430, indicating insufficient bullish momentum. Since hitting a record high of 126.08K in early October, Bitcoin has declined by about 30%, with a year-to-date drop of 23%.

$23 Billion in Options Expiring: The Real Threat Is Ahead

The rate hike by the Bank of Japan is just surface-level; the bigger threat lies in the derivatives market. About $23 billion worth of Bitcoin options contracts are set to expire next Friday, accounting for over 50% of the open interest on the world’s largest options trading platform, Deribit.

This scale is enough to amplify any price volatility. In fact, during the US trading session last Wednesday, Bitcoin experienced over $130 billion in price swings within just one hour, triggering chain liquidations on both sides. The entire crypto market cap fluctuated violently near the $3 trillion mark.

Options market data further reveal the market’s true sentiment. Put options are heavily concentrated around the $85,000 strike, with open interest of about $1.4 billion, forming a “price magnet.” In contrast, call options at $100K and $120K strikes exist but mainly reflect market mild optimism about a technical rebound toward the end of the year.

Position Structure Remains Bearish, Bulls on the Defensive

Trading data reflect the true attitude of market participants. The 30-day implied volatility has risen back to nearly 45%, while skew (a measure of the cost of upside potential versus downside protection) hovers around -5%, indicating traders are pricing in continued downside.

This defensive stance is not unfounded. Persistent selling pressure from long-dormant wallets continues to suppress spot prices, suggesting large holders are offloading on rallies. Additionally, inflows of covered call trades from institutional investors further limit upside potential.

Two Major Catalysts Could Amplify Volatility Again

After options expiry, traders expect to re-position around two events. First is the MSCI decision on January 15, which may remove “digital asset treasury companies” holding more than 50% of their assets in crypto from its index, impacting related stocks. Second is a new wave of institutional covered call inflows, which could further restrict upside and amplify downside volatility.

Currently, Bitcoin is heading toward its worst quarter since Q2 2022 — when the collapse of TerraUSD and Three Arrows Capital devastated the industry. The market is stuck in a fragile sideways stalemate, with key levels remaining unrecaptured for a long time.

Overall, volatility remains high, and the position structure is clearly defensive, but the market has not completely abandoned upside tail risks. As turbulent times approach, whether Bitcoin can break through this cycle remains to be seen.