Bitcoin Traders Remain Cautious Ahead of New Year

No breakout yet - Why Bitcoin traders are on the defensive before the New Year

Summary:
As we approach the end of 2025, Bitcoin is facing pressure, with the possibility of closing the year in the red if it fails to surpass $94,000 by New Year's Eve. After a decline of 5.7% throughout the year, traders are feeling cautious about potential price movements in early January.

Key Takeaways:

Bitcoin is down 5.7% in 2025, closing below $94,000 could result in a negative year-end.
Options market analysis shows a trend toward protective positioning among traders.
Institutional demand for Bitcoin has decreased, evident from increasing ETF outflows.
The cryptocurrency market remains uncertain due to various external factors, with Bitcoin trading below $90,000.

Cautious Sentiment in the Bitcoin Market

Bitcoin is nearing the end of 2025 in a precarious position. The leading cryptocurrency could finish the year negatively if it does not close above $94,000 by New Year’s Eve. Currently, Bitcoin has dropped 5.7% throughout the year, especially struggling during the Christmas week while U.S. equity markets reached new heights.

Given these circumstances, traders are generally cautious, with many expressing concerns that Bitcoin's sluggish performance might stretch into the beginning of January.

Bitcoin Laevitas

Analyzing Short-Term Market Dynamics

Recent analytics from the Options platform Leavitas indicate that short-term market conditions are expected to be bumpy, with a preference for downside protection among savvy traders. The recent decline in 1-week 25-Delta Risk Reversal (RR) suggests a growing demand for hedges or bearish bets.

The trends across all tenors—ranging from one week to one year—show negative values, reinforcing that institutions are leaning towards hedging rather than speculating on significant upward movements. A shift to a positive market sentiment would be indicated by a return of the 25-Delta RR to zero or positive territory. According to QCP Capital, a cryptocurrency trading firm based in Singapore, Bitcoin's direction might stabilize once liquidity returns to the market. They noted that open interest has decreased nearly 50% following the expiration of options on December 26, indicating limited conviction among traders as capital remains on the sidelines.

Declining Institutional Demand for Bitcoin

The cautious sentiment in the options market is mirrored by trends in institutional demand. By late 2025, outflows from U.S. Spot ETFs totaled $5.5 billion—the highest level since their launch in 2024. This trend appears to stem from hedge funds pulling back on their positions after a substantial drop in trade yields—from 10% down to 5%.

Despite this, cumulative inflows into these ETFs were only down 9% from their peak of $62 billion in October, suggesting that, in the long-term, many ETF holders still retain a level of confidence, despite the quarterly downturn.

US Bitcoin ETFs

Nevertheless, the Q4 downturn in the market was magnified by several elements, including the crash on October 10 and the MSCI index review of Bitcoin treasury firms. The ongoing risk of MSCI delisting remains significant, with over a 75% probability in Q1 2025, potentially keeping the market in a range until mid-January.

Since mid-December, Bitcoin has struggled to rise above $90,000, encountering resistance at $94,000. This sideways trading pattern is likely to persist into early January.

BTC/USDT Trading

Conclusion

In conclusion, Bitcoin traders find themselves in a defensive position as 2025 approaches its end. With market uncertainties and a cautious atmosphere prevailing, traders will be closely monitoring upcoming developments to gauge potential price movements in early 2026.