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The Bitcoin derivatives market is facing a potentially prolonged recovery period, with activity not expected to return to pre-crash levels until the first or second quarter of 2026, according to Max Xu, Bybit’s derivatives operations director. This outlook follows a significant flash crash on October 10 that erased an estimated $19 billion in open interest from the market.
Bitcoin Derivatives Market Faces Prolonged Recovery
The October 10 market correction, which ranks among the largest ever for Bitcoin derivatives, saw total open interest in futures, options, and perpetual contracts plummet from $220 billion to approximately $140 billion. Bitcoin itself has also seen a downturn, trading around $100,800, marking a 10.5% decrease over the past month.
Despite the sharp decline in open interest, derivatives volumes surged to $748 billion on the day of the crash before stabilizing around its usual $300 billion level in the subsequent week. Xu noted that a rapid rebound is unlikely, but a constructive medium-term outlook persists, particularly if favorable macroeconomic conditions, such as anticipated rate cuts, materialize.
Data from Deribit, a major crypto derivatives exchange, indicates significant clusters of bullish call contracts. Specifically, there’s a $1.1 billion cluster at the $140,000 strike price and another $887 million cluster at $200,000, both set to expire on December 26. Conversely, a substantial $1.1 billion cluster of bearish contracts sits at the $85,000 price point.
Xu anticipates a relatively quieter year-end expiry due to lighter market positioning and reduced mechanical pressure, which should contribute to market stability. However, he cautioned that activity will likely concentrate around key strike levels, and any renewed volatility or Bitcoin ETF-related flows could still lead to short-term dislocations. Despite these potential disruptions, the overall setup for the derivatives market heading into 2026 is considered healthier.
UFC Parent TKO Partners with Polymarket for Prediction Market
TKO Group Holdings, the parent company of the Ultimate Fighting Championship (UFC) and Zuffa Boxing, has entered into a multi-year exclusive agreement with Polymarket. This partnership designates Polymarket as the official prediction market partner, aiming to enhance fan engagement through new features like a real-time Fan Prediction Scoreboard during UFC broadcasts, which will visualize global fan sentiment and fight forecasts.
Circle Introduces On-Chain FX Engine for Stablecoin Trading
USDC stablecoin issuer Circle has launched Circle StableFX, an institutional-grade foreign exchange engine designed to facilitate 24/7 stablecoin currency pair trading with on-chain settlement on its Arc blockchain network. Concurrently, the company announced Circle Partner Stablecoins, a program aimed at supporting regional stablecoin deployments on Arc, thereby creating a unified infrastructure for global FX activities.
Taiwan Considers Bitcoin as Strategic Reserve Asset
A Taiwanese lawmaker is advocating for the government to explore adding Bitcoin to its strategic reserves. This initiative comes amid global predictions that digital assets could become part of central bank balance sheets within the next decade and is driven by concerns over Taiwan’s exposure to U.S. debt and China’s economic cycles, as well as the need for transparency regarding seized Bitcoin in criminal cases and the risk of lagging behind other jurisdictions in digital reserve diversification.
The Bitcoin derivatives market is navigating a complex period of recovery after the substantial October flash crash. While a full return to prior open interest levels may take over a year, expert analysis suggests a stabilizing market environment, albeit with potential short-term volatility influenced by key price levels and emerging investment products like ETFs.
