Bitcoin’s Continued Decline
Bitcoin extended its losses on Friday, falling below $85,500 according to market data. The cryptocurrency has now dropped more than 7% over the past day and over 20% in the last month. This decline appears to be outpacing losses in traditional equities markets, which have held up better thanks to strong earnings from companies like Nvidia.
I think what’s interesting here is how this crypto weakness contrasts with the relative stability in stocks. It suggests something specific is happening in the digital asset space rather than just general market sentiment.
Market Structure Weakens
Market maker FlowDesk noted in a Telegram update that the market is struggling with significant coin supply hitting centralized exchanges. They’re seeing tens of thousands of coins moving from long-dormant bitcoin wallets after years of inactivity.
These flows have apparently overwhelmed buying interest, keeping spot market activity skewed toward sellers. The firm mentioned that managers are positioning more defensively as we approach year-end, focusing more on protecting gains than adding exposure. This has thinned liquidity at key support levels, which perhaps explains why the declines have been so pronounced.
Derivatives and Options Shift
The weakness isn’t just in spot markets. FlowDesk observed that derivatives flows mirror the spot market struggles, with large BTC and ETH buyers on the downside. Traders are rolling put positions lower to maintain protection as volatility curves remain heavily tilted toward puts.
Options data from Deribit shows a significant reversal in sentiment. The once-dominant $140,000 call has been eclipsed by the $85,000 put, which has become the largest open-interest strike in the entire BTC options market. This suggests traders are repositioning for further downside rather than anticipating new highs.
MicroStrategy’s Position
As Bitcoin continues to slide, attention is turning to MicroStrategy. The stock’s price is approaching the company’s average break-even point of $74,430 for its bitcoin holdings. JPMorgan noted in a recent analysis that the stock’s underperformance reflects growing anxiety over a possible removal from the MSCI index in January.
Such a decision could trigger billions in passive outflows and add another layer of stress to an already fragile crypto market. It’s one of those situations where different market pressures seem to be converging at once.
