Bitcoin options contracts show that traders are betting that the largest cryptocurrency will remain stuck within its current trading range, following a last quarter's slump that wiped out more than $1 trillion in value from the digital asset market.
The largest cryptocurrency by market capitalization fell as much as 4.4% to $88,135 yesterday, dropping below the average of its trading range of roughly $100,000 to $80,000, which it had maintained for the past three weeks. Bitcoin represents approximately 60% of the total cryptocurrency market capitalization.
Bitcoin options contracts
Data from Coinbase's Deribit platform indicates that open options contracts expiring in late December have jumped significantly compared to longer-term contracts, partly due to traders selling contracts to earn premiums based on expectations of lower near-term volatility.
“Bitcoin options contracts reflect a clear preference for range-bound trading in the near term, betting on reduced volatility and minimizing speculation on price movements in both directions,” said Jasper de Mar, a strategist at Wintermet, in a note yesterday. “At the same time, longer-term contracts continue to attract additional interest, suggesting expectations of current stability with the potential for larger moves later.”
Bitcoin hit a record high of over $126,000 earlier this year. But a two-month slump – triggered by billions of dollars in forced sell-offs and a collapse in momentum among retail investors – has fueled a broad sell-off in the sector.
BlackRock’s iShares Bitcoin Trust has recorded its longest streak of weekly withdrawals since its launch in January 2024, a further indication that institutional appetite remains weak despite prices stabilizing within a defined range. Investors withdrew more than $2.7 billion from the fund in the five weeks ending November 28, according to data compiled by Bloomberg. With an additional $113 million in redemptions on Wednesday, the fund is on track for its sixth consecutive week of outflows.
Bitcoin crash
The recent slump in Bitcoin's performance has left it underperforming the S&P 500 year-to-date for the first time in over a decade. The cryptocurrency has rarely diverged so sharply from other high-risk assets, even during previous crypto winters. This divergence contradicts expectations that cryptocurrencies would flourish with the return of US President Donald Trump to the White House, amid favorable regulatory conditions and a surge of institutional engagement in the sector.
The cycles of rise and fall in digital assets over the years have spawned a whole host of specialized terms to describe these fluctuations, such as the crypto winter to denote periods of deep decline. The last major winter occurred between late 2021 and well into 2023, when Bitcoin's price plummeted by more than 70% from its peak to its lowest point.
Bitcoin and stocks have historically moved in the same direction – a relationship that was highlighted during the coronavirus pandemic when low interest rates helped fuel upward trends in stocks, cryptocurrencies, and other speculative investments.
Bitcoin perpetual contracts, which represent the largest volume in cryptocurrency trading, are trending downward as funding rates turn negative, meaning that investors betting on the downside are paying bullish bets to hold their short positions, according to Coinglass data.
alternative cryptocurrencies
Altcoins are under similar pressure. Ether options traders remain defensive, with a continued focus on protecting against downside and only selectively participating in bullish bets.
The decline in altcoin trading volumes on decentralized finance platforms like Hyperliquid indicates a slow recovery for these assets since the historic sell-off on October 10, which wiped out approximately $19 billion in digital assets. Open options contracts for smaller cryptocurrencies like Solana and XRP have also shown little recovery since the crash in early October, according to Coinglass data.
