Cautious Approach: Crypto Traders Prefer Bitcoin Over Riskier Altcoin Investments

Bitcoin has surged to approximately $92,000 following a significant $2 billion liquidation event last week. However, traders are adopting a more careful stance due to high market volatility and important decisions from central banks approaching.

Key Takeaways

Bitcoin has risen to approximately $92,000 after last week’s $2 billion liquidation event but traders are adopting a cautious stance.
Market activities have become increasingly focused on Bitcoin and Ethereum, with preferences for delta-neutral strategies.
Last Friday’s sell-off temporarily pushed Bitcoin below $88,000, but buyers quickly stepped in.
ETF flows have reversed significantly, indicating profit-taking among investors.
MicroStrategy continues to aggressively accumulate Bitcoin, while futures interest declines in favor of yield capture strategies.

Crypto Traders Turn Cautious, Favor Bitcoin Over Risky Altcoin Bets

Market maker Wintermute indicates that trading activity has significantly focused on Bitcoin and Ethereum, with investors leaning towards delta-neutral and carry strategies instead of taking risks with altcoins as they await clarity from the Federal Reserve and other macroeconomic indicators.

This cautious consolidation comes after two months of macroeconomic uncertainty that brought considerable turbulence to the market. The total cryptocurrency market cap has bounced back to about $3.25 trillion.

Despite this recovery, reduced basis rates and low funding levels suggest that there is limited interest in leveraged trading ahead of the Federal Reserve's decision this week and the Bank of Japan's rate announcement next week.

Bitcoin Over Altcoin - Wintermute Cross-asset performance

Market Stabilizes After Severe Sell-off

Last Friday’s dramatic sell-off dealt a significant blow to Bitcoin’s recovery, leading to cascading liquidations that dropped the price by roughly $4,000 in just over an hour.

This liquidation episode wiped out about $2 billion in leveraged positions, which briefly sent Bitcoin below $88,000 before buyers entered at lower price levels.

Despite the volatility, the market managed to absorb the shock without creating significant selling pressure. According to data from Glassnode, Bitcoin’s 14-day Relative Strength Index (RSI) rose from 38.6 to 58.2, while the spot trading volume increased by 13.2% to $11.1 billion.

These figures indicate that buyers remained active during the lows, even as overall market conviction appears inconsistent across various indicators, including on-chain metrics, derivatives, and ETFs.

Bitcoin Over Altcoin - Glassnode off-chain and on-chain insights

Elevated Volatility Levels as Traders Prepare for Year-End Moves

The implied volatility for the end of the year remains high, with traders positioning themselves for Bitcoin prices to reach either $85,000 or $100,000 by December 26.

Options data show increased caution among traders, with the 25-delta skew reaching 12.88% and volatility spread dropping to -14.6%. This indicates a strong demand for downside protection despite Bitcoin's recent bounce.

Bitcoin Over Altcoin - Glassnode Options Delta Skew

Institutional Investment Weakens Amid Concerns

ETF investments have turned into a significant challenge, shifting from a $134.2 million inflow to an outflow of $707.3 million.

Bitcoin Over Altcoin - Glassnode ETF Netflow (weekly)

This shift suggests profit-taking or dwindling institutional interest following Bitcoin’s recent price volatility, which is placing additional pressure on short-term price trends.

Despite a 21.33% rise in ETF trade volume to $22.6 billion and an increase in ETF MVRV to 1.67, substantial outflows imply that some investors are cashing in on high prices to lower their exposure.

Bitcoin Over Altcoin - ETF MVRV

Arthur Azizov, founder and investor at B2 Ventures, noted the significant impact of ongoing withdrawals. “Over $2.7 billion has exited BTC products in the last five weeks, including $194 million in just one day,” he stated. He added, “When there are persistent withdrawal patterns, the whole market tends to quiet down and lacks support.”

On the other hand, MicroStrategy has continued its aggressive accumulation strategy, recently adding 10,624 BTC for around $962.7 million at an average price of $90,615 per bitcoin. The company currently holds 660,624 BTC, valued at approximately $49.35 billion with an average acquisition cost of $74,696, and 2025 additions total $21.48 billion, just short of their total 2024 accumulation goal.

Yield Capture Takes Precedence Over Speculative Bets

Futures open interest has fallen to $30.6 billion, while perpetual funding rates have become more favorable, with long-side payments rising to $522,700.

Bitcoin Over Altcoin - Futures Open Interest

However, the compression of the CME basis has led to increased focus on delta-neutral strategies in lower-cap assets, where carry opportunities remain appealing, showing a reluctance to pursue risky altcoin trades.

On-chain metrics reflect slight stability, as active addresses have risen to 693,035, and entity-adjusted transfer volume increased by 17.1% to $8.9 billion.

Bitcoin Over Altcoin - Onchain Transfer Volume

However, the Realised Cap Change fell to just 0.7%, indicating weak capital inflows, while the short-term to long-term holder ratio increased to 18.5%, suggesting continued dominance by short-term investors.

Ignacio Aguirre, CMO at Bitget, warned of additional pressure from global monetary policy changes. “A stronger yen raises the risk of unraveling yen carry trades, potentially lowering cryptocurrency valuations as leveraged positions reset across global markets,” he explained.

Azizov highlighted critical resistance levels for Bitcoin. “A strong move above $100,000 could restore confidence and pave the way towards $120,000+,” he concluded. “If that does not happen, we may need to see a significant pullback to the broader range of $82,000–$88,000.”