Bitcoin Options Signal Traders Bracing for a Long, Harsh Crypto Winter

Bitcoin options markets are signaling that traders expect the world’s largest cryptocurrency to stay locked in its current price band, even after a bruising fourth-quarter slide that erased more than $1 trillion from the digital-asset landscape.

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On Friday, Bitcoin the biggest crypto asset by market capitalization fell as much as 4.4% to $88,135, slipping below the midpoint of the $80,000 to $100,000 range where it has hovered for the past three weeks. Bitcoin alone makes up nearly 60% of the entire crypto market’s valuation.

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Options positioning reinforces the idea that traders are bracing for muted movement in the near term. Open interest for contracts expiring in late December has climbed far above interest in longer-dated options, a trend boosted by traders selling short-term contracts to collect premiums in what they expect to be a low-volatility window, according to data from Coinbase’s Deribit.

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“Bitcoin options clearly show traders leaning into near-term range-bound action, with volatility being sold and both ends of the distribution fading,” wrote Jasper De Maere, desk strategist at Wintermute, in a Friday note. “At the same time, investors are still adding longer-dated options, suggesting they expect stability now but potential for bigger swings later.”

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Earlier this year, Bitcoin surged to an all-time high above $126,000. But a swift two-month selloff driven by billions of dollars in forced liquidations and fading retail enthusiasm has pushed the broader crypto market into retreat.

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One clear sign of cooling institutional interest: BlackRock’s iShares Bitcoin Trust has logged its longest stretch of weekly outflows since launching in January 2024. Investors pulled more than $2.7 billion from the ETF over the five weeks through Nov. 28, according to Bloomberg-compiled data. With another $113 million leaving the fund on Thursday, the vehicle is now on track for its sixth consecutive week of net withdrawals.

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The downturn has left Bitcoin lagging behind the S&P 500 on a year-to-date basis for the first time in more than ten years. Even during prior “crypto winters,” the token rarely diverged so sharply from traditional risk assets. This decoupling runs counter to expectations that digital currencies would shine under President Donald Trump’s return to the White House, given the anticipated regulatory tailwinds and greater institutional engagement.

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Crypto’s boom-and-bust cycles have given rise to their own vocabulary most notably the term “crypto winter,” used to describe deep, prolonged market downturns. The last such winter spanned from late 2021 through much of 2023, during which Bitcoin plunged more than 70% from peak to trough.

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Historically, Bitcoin has tended to move in sync with equities, a relationship that strengthened during the pandemic when low interest rates fueled rallies across tech stocks, crypto assets, and other speculative corners of the market.

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Perpetual futures one of the highest-volume products in crypto trading are now flashing a more bearish tone. Funding rates for Bitcoin perpetuals have turned negative, meaning traders betting against the token are paying bullish investors to maintain their long positions, according to Coinglass data. It’s a sign that pessimism is becoming more entrenched in derivatives markets.

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Altcoins are facing similar headwinds. In Ether options, traders continue to favor defensive positioning, maintaining strong demand for downside protection while showing only selective interest in upside calls.

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Trading activity across decentralized finance platforms tells the same story. Volumes for many altcoins have dropped meaningfully on exchanges such as Hyperliquid, pointing to a sluggish recovery since the historic October 10 liquidations that wiped out roughly $19 billion in digital assets. Futures open interest in smaller tokens like Solana and XRP has yet to meaningfully rebound following the early October decline, according to Coinglass.

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Together, the options, futures, and ETF flows paint a picture of a market stuck in neutral. Traders appear hesitant to make bold directional bets in the short term, even as they quietly position themselves for the possibility of larger moves later on. For Bitcoin and the broader digital-asset ecosystem, the next catalyst may need to come from either a shift in macro conditions, a resurgence in institutional demand, or a decisive shift in market sentiment none of which have yet materialized.

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