Bitcoin Loses $716 Billion Since All-Time High – Factors Impacting BTC

Bitcoin is currently experiencing one of its most challenging periods. Since its market capitalization reached an all-time high of $2.486 trillion, it has lost about $716 billion. As of now, its market cap sits at approximately $1.77 trillion, according to CoinMarketCap.

Key Takeaways

Bitcoin has lost $716 billion since its all-time high, currently valued at $1.77 trillion.
Capital inflows have decreased for the first time in over two years, with realized capitalization remaining flat.
Despite bearish liquidity signals, Bitcoin has not sharply declined and there is still buyer interest evident in the spot market.
Market behavior is influenced more by options trading than by overall sentiment, which restricts Bitcoin's price movement within certain ranges.

This represents a significant decline of 28.8%, not happening without causes. Bitcoin (BTC) is trading around $88,900, and various elements have played a role in this downturn. AMBCrypto explores the factors affecting Bitcoin's performance and what might influence its future trajectory.

Capital Inflows Decrease After 2.5 Years

The recent drop in Bitcoin's price is primarily due to capital exiting the market. Although this may seem straightforward, on-chain data reveals a more complex trend.

For the first time in over two years and six months, capital inflows have started to decline, as realized capitalization has plateaued during this time. The Profit and Loss (PnL) Index Signal highlights this shift by analyzing various metrics based on a 365-day moving average to assess whether the market is undervalued or overvalued.

Bitcoin PnL Index signal

Source: CryptoQuant

Realized Capitalization has remained stable for nearly a month, indicating that fresh capital hasn't been entering the market as investors gradually withdraw their funds. Ki Young Ju, Founder of CryptoQuant, remarked that periods like this typically need time to stabilize, as recovery hinges on attracting new investments. He mentioned, “Sentiment recovery might take a few months.”

With over $700 billion having exited and few inflows to counteract this, Bitcoin's price structure remains weak. Under normal circumstances, this situation increases the chances of further price stagnation or decline.

Is This the End for Bitcoin?

Despite the slowdown in liquidity signaling bearish sentiment, the price of Bitcoin has not sharply plummeted. Recent spot market data indicates that buyer activity has exceeded selling pressure over the last three months. The Bitcoin Spot Taker Buy–Sell Cumulative Volume Delta suggests investors are still in a buying phase, indicating ongoing retail interest in the market.

Bitcoin Spot Taker CVD (Cumulative Volume Delta, 90-day)

Source: CryptoQuant

This behavior explains why Bitcoin has maintained its price range despite declining capital inflows. The Spot market supports this trend as investors have continued to accumulate Bitcoin since December. From the week ending December 1 to the week ending December 15, total spot purchases reached around $3.12 billion. When selling pressure is absorbed, it limits how much prices can fall, even in a largely bearish environment.

Bitcoin Faces Structural Constraints

Market analyst David attributes Bitcoin’s price behavior more to options traders hedging their positions rather than shifts in investor sentiment. The analysis reveals that call and put options near $90,000 and $85,000 have effectively confined Bitcoin's trading within a narrow range. This setup creates a positive gamma environment that mechanically restricts price movement.

In practical terms, as Bitcoin approaches the $90,000 mark, market makers encounter a selling pressure of approximately $40.7 million. Conversely, when the price nears $85,000, buy orders around $80 million come into play. This dynamic produces a gamma effect, keeping prices fluctuating within set boundaries.

Source: X

This analysis confirms that Bitcoin's recent range-bound activity is primarily driven by market structure and not sentiment. An estimated $278 million—about 54% of total market gamma—is due to expire on December 26, in alignment with the expiration of $23 billion in options contracts.

Once this gamma expires, Bitcoin may shift back to price movements driven by sentiment. If bullish pressure remains evident, as suggested by trends in spot volume, conditions may favor a potential price rebound as genuine price discovery resumes.