Bitcoin Options traders are positioning for continued range-bound trading as the cryptocurrency struggles near $88,000, with open interest data showing expectations of low volatility in the near term. The largest digital asset by market value has trailed the S&P 500 on an annual basis for the first time in more than a decade.
What Happened: Range-Bound Expectations
Bitcoin options data from Coinbase's Deribit platform show traders are betting the cryptocurrency will remain confined to its current trading range following a fourth-quarter downturn that erased more than $1 trillion from the digital asset market.
The token dropped 4.4% to $88,135 on Friday, falling below the median of the roughly $80,000 to $100,000 range where it has traded for the past three weeks.
Open interest for options expiring in late December has far exceeded longer-dated contracts, driven partly by traders selling contracts to collect premiums on expectations of low volatility in the near term.
Bitcoin accounts for almost 60% of the entire crypto market's total value. Earlier this year, the cryptocurrency notched a record high above $126,000 before a two-month rout triggered by billions of dollars in forced liquidations and a collapse in retail momentum sparked an industry-wide downturn.
BlackRock Inc.'s iShares Bitcoin Trust has recorded its longest streak of weekly withdrawals since debuting in Jan. 2024.
Investors pulled more than $2.7 billion from the exchange-traded fund over the five weeks through Nov. 28, according to data compiled by Bloomberg. With an additional $113 million in redemptions on Thursday, the ETF is on pace for a sixth consecutive week of net outflows.
Also Read: PwC: Hedge-Fund Crypto Exposure Surges To 55%, Up From 47% Last Year
Why It Matters: Institutional Retreat
"Bitcoin options show a clear preference for near-term range trading, with volatility being sold and both wings faded," Jasper De Maere, desk strategist at Wintermute, wrote in a note Friday. "At the same time, longer-dated optionality is still being added, indicating expectations of stability now but room for larger moves later."
The selloff has Bitcoin trailing the returns of the S&P 500 on an annual basis for the first time in more than a decade.
The digital asset has rarely deviated so cleanly from other risk assets even during past crypto winters. The dislocation defies expectations that cryptocurrencies would thrive under President Donald Trump's return to the White House amid favorable regulation and a wave of institutional adoption.
Perpetual futures contracts for Bitcoin are showing a bearish tilt with funding rates flipping negative, meaning bearish investors are paying bullish bettors to stay in their short positions, according to data from Coinglass. Altcoins including Ether, Solana and XRP face similar pressure, with open interest for smaller tokens' futures contracts showing no significant recovery since the early October collapse that wiped out around $19 billion in digital assets.
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