The recent pullback in Bitcoin’s price has triggered a significant shift in the cryptocurrency options market, revealing changing sentiment among investors and institutional players. After narrowly missing the much-anticipated $100,000 milestone, Bitcoin retreated more than 8%, dropping to a weekly low of $91,377.32 on Tuesday. This correction has sparked renewed hedging activity, with traders adjusting their positions ahead of a major options expiry event.
Despite the dip, Bitcoin remains up 120% year-to-date and nearly 34% higher this month alone. The rally has been fueled by growing regulatory optimism following Donald Trump’s U.S. presidential election victory and the emergence of pro-crypto lawmakers in Congress. During his campaign, Trump voiced strong support for digital assets, pledging to make America the “crypto capital of the world” and even proposing a national Bitcoin reserve.
Market Sentiment Shifts: Traders Hedge Against Downside Risk
Recent data from Derive, a decentralized options protocol with $7.1 billion in total trading volume, shows a notable change in market behavior. According to Nick Forster, founder of Derive, the Bitcoin call-put skew index for options expiring on December 27 dropped sharply by 30% over the past 24 hours.
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The call-put skew measures the difference in implied volatility between call (bullish) and put (bearish) options, offering insight into trader sentiment. A declining skew suggests increased demand for protective puts—options that profit if prices fall—indicating that traders are preparing for potential downside.
While the index still reflects more bullish than bearish positioning overall, the sudden shift signals growing caution. “This suggests traders are beginning to hedge against potential downside risks,” Forster explained via email. “It could be a reaction to the recent drop in Bitcoin’s price. However, such pullbacks are not uncommon even within strong bull markets.”
December 27: A Key Date for Bitcoin Volatility
All eyes are now on December 27, when approximately $11.8 billion worth of Bitcoin options will expire. Large options expiries often lead to increased price volatility as market makers adjust their hedges around strike levels.
Forster estimates that there's a 68% probability Bitcoin will trade between $81,493 (down 16.03%)** and **$115,579 (up 19.9%) by that date. Meanwhile, a more extreme move—either down to $68,429 (-29.49%)** or up to **$137,645 (+41.83%)—has about a 5% likelihood.
These projections are based on current implied volatility levels, which remain elevated and tightly clustered. Over the past seven days, Bitcoin’s implied volatility has stabilized at 63% for the next seven days and 55% over the next 30 days.
“This tight consistency suggests the market expects a significant price move in the near term,” Forster noted.
Bullish Outlook Persists Despite Correction
Even amid the sell-off, long-term optimism hasn’t vanished. Derive’s data reveals that the probability of Bitcoin reaching $100,000 has increased from 34% last week to 45%**, while there's now a **4% chance it could surpass $150,000 before year-end.
Such figures indicate that while traders are hedging against short-term risk, many still believe in a strong upward trajectory. The underlying fundamentals—macroeconomic tailwinds, increasing institutional adoption, and favorable regulatory momentum—are continuing to support bullish sentiment.
Profit-Taking Fuels Recent Decline
One major factor behind the recent price drop is widespread profit-taking, especially among long-term holders. According to Anthony Pompliano, founder and CEO of Professional Capital Management, long-term Bitcoin investors have sold off $60 billion worth of BTC in the past 30 days.
Notably, 21% of all long-term holder sell-offs since the FTX collapse two years ago—when Bitcoin hit a low of $15,479—occurred in November alone. Pompliano described this as “the most severe profit-taking seen in this cycle so far.”
This kind of strategic selling is typical near market peaks and often acts as a natural cooling mechanism after rapid rallies.
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Frequently Asked Questions (FAQ)
Q: What is the call-put skew index?
A: The call-put skew measures the difference in implied volatility between call and put options. A higher skew indicates more bullish sentiment; a lower skew suggests increased bearish hedging or caution.
Q: Why is December 27 important for Bitcoin?
A: Around $11.8 billion in Bitcoin options expire on that date, which can trigger significant price volatility as traders close positions and market makers rebalance hedges.
Q: Is the recent Bitcoin drop a sign of a bear market?
A: Not necessarily. While prices have corrected from their highs, strong fundamentals and rising institutional interest suggest this may be a healthy pullback within an ongoing bull cycle.
Q: How likely is Bitcoin to hit $100,000?
A: Market data shows a 45% probability of Bitcoin reaching $100,000 before year-end—an increase from 34% just last week—indicating sustained bullish momentum despite short-term volatility.
Q: Who is selling Bitcoin now?
A: Long-term holders are taking profits after substantial gains. Over $60 billion worth of BTC has been sold in the past month, marking one of the largest profit-taking events in this market cycle.
Q: What does implied volatility tell us about Bitcoin?
A: High and consistent implied volatility signals that traders expect large price movements soon. Current levels (63% short-term, 55% long-term) point to anticipation of significant moves before year-end.
Final Thoughts: Caution Meets Opportunity
The current phase of the Bitcoin market reflects a classic dynamic: optimism tempered by prudence. Traders are not abandoning their bullish outlook but are instead protecting gains and preparing for uncertainty.
With major political support, strong technical indicators, and growing adoption, the long-term case for Bitcoin remains compelling. At the same time, smart investors are using tools like options and hedging strategies to navigate short-term turbulence.
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As we approach year-end and the December 27 expiry looms, every price swing carries greater weight. Whether Bitcoin breaks through $100,000 or pulls back further, one thing is clear: the market is preparing for impact.