Bitcoin is currently navigating a challenging landscape, fluctuating within a tight $81K–$89K range as liquidity wanes and realized losses increase, as per reports. The cryptocurrency market is reflecting the vulnerabilities seen in early 2022, as futures markets indicate a trend of deleveraging while options markets continue to adopt a cautious approach. Bitcoin’s price has faced significant pressure after dropping below the short-term holder cost basis of around $104.6K in October. The present trading range reflects a comparable phase in Q1 2022, a time marked by diminishing demand and liquidity in the market. The Entity-Adjusted Realized Loss has skyrocketed to $403.4 million per day, exceeding earlier lows and signaling a notable decline in market confidence.
The Short-Term Holder Realized Profit/Loss Ratio has plummeted to 0.07x, underscoring a significant prevalence of losses compared to profits among the latest investors. This indicates that liquidity is diminishing, and the market may be at risk of falling below the True Market Mean of approximately $81K if the situation does not get better. In the derivatives markets, futures open interest is on a downward trend, paralleling Bitcoin’s price movement. This suggests a measured unwinding of leverage, occurring without the chaos typically associated with forced liquidations. This indicates a prudent attitude among traders, who are choosing to adopt a risk-off strategy.
Options markets are experiencing a surge in open interest, especially in BTC terms, driven by heightened volatility and a growing demand for risk management strategies. Nonetheless, the distribution of options interest reveals a significant concentration of puts near $84K and calls around $100K, indicating a lack of confidence in a prolonged upward trajectory. The overall market sentiment is marked by caution, as Bitcoin’s price struggles to regain crucial cost-basis levels. Current on-chain and off-chain metrics suggest that the market is experiencing a phase of defensive consolidation, characterized by thin liquidity and subdued demand.
The approaching December expiry in the options market is anticipated to be a significant volatility event, likely to impact market dynamics further. Overall, Bitcoin’s current trajectory indicates that it is not experiencing full capitulation, yet it continues to encounter substantial hurdles in its quest to regain momentum. Until we see a resurgence in demand and a price recovery above critical levels, the market is expected to stay in a low-liquidity, low-conviction phase.