Bitcoin’s Continued Slide
Bitcoin extended its decline Friday morning, falling below $85,500 according to market data. The cryptocurrency has now dropped more than 7% over the past 24 hours and over 20% in the past month. This downward movement comes as the market absorbs fresh selling pressure and reacts to shifting global rate expectations.
What’s interesting is how Bitcoin’s performance contrasts with traditional equities. While crypto struggles, stocks have remained relatively stable, partly thanks to strong earnings from companies like Nvidia that have helped counter fears about an AI bubble.
Dormant Wallets Awaken
Market maker FlowDesk noted in a Telegram update that the market continues to face challenges from a significant supply of coins hitting centralized exchanges. These coins are coming from long-dormant Bitcoin wallets that have suddenly become active after years of inactivity.
Tens of thousands of coins have moved from these previously inactive addresses, creating a supply wave that has overwhelmed buying interest. The spot market activity now appears decisively skewed toward sellers rather than buyers.
Defensive Positioning Takes Hold
As we approach year-end, market participants seem to be shifting their strategies. According to FlowDesk’s analysis, managers are now positioning more defensively, focusing on protecting existing gains rather than adding new exposure. This cautious approach has thinned liquidity at key support levels, making the market more vulnerable to price swings.
The weakness isn’t limited to spot markets either. Derivatives flows mirror the bearish sentiment, with large buyers appearing on the downside for both Bitcoin and Ethereum. Traders are rolling their put positions lower to maintain protection as volatility curves remain heavily tilted toward puts.
Options Market Signals Shift
Options data from Deribit shows a notable reversal in market sentiment. The once-dominant $140,000 call option has been eclipsed by the $85,000 put, which has become the largest open-interest strike in the entire Bitcoin options market. This suggests traders are repositioning for further downside rather than anticipating new highs.
All eyes now turn to MicroStrategy as Bitcoin’s price approaches the company’s average break-even point of $74,430. JPMorgan recently noted that the stock’s underperformance reflects growing anxiety about a potential removal from the MSCI index in January. Such a decision could trigger billions in passive outflows, adding another layer of stress to an already fragile crypto market.
I think what we’re seeing here is a classic year-end risk-off positioning combined with some technical factors. The movement from dormant wallets is particularly noteworthy – it suggests that long-term holders might be taking profits or repositioning after years of holding. This kind of activity often signals important turning points in market cycles, though it’s hard to say for certain what comes next.
The options market shift from calls to puts is telling. When traders start paying for protection at lower levels rather than betting on higher prices, it usually indicates a change in sentiment. Still, markets can be unpredictable, and sometimes the most bearish setups lead to unexpected rallies. We’ll have to wait and see how this plays out as we move into the new year.
