Bitcoin’s Year-End Outlook Dims as Price Drops Below $90,000

The probability of Bitcoin finishing the year below $90,000 has reached 50 percent, according to the online options platform Derive.xyz. This shift comes as traders increase their hedging activities against further declines in the cryptocurrency market. In contrast, the options market currently assigns only a 30 percent chance for Bitcoin to exceed $100,000 by the end of 2025.

As of Thursday, Bitcoin was trading down 4.2 percent at $86,681.41, having fallen to a seven-month low earlier in the day. This decline follows an all-time high of $126,223.18 reached in early October. Year-to-date, Bitcoin has dropped more than 7 percent, setting the stage for its first annual decline since 2022. Analysts note that Bitcoin has fallen below both its 50-day and 200-day moving averages, leading many trend-following investors to reconsider their positions.

Sean Dawson, head of research at Derive.xyz based in Canberra, Australia, commented on the current market conditions, stating, “The BTC price is currently very tenuous and skewed to the downside.” Dawson noted that previous market drivers, such as lowered interest rates, have lost their momentum, leaving little to encourage bullish sentiment. He highlighted that liquidations in the cryptocurrency market over the past 30 days have reached a staggering $8.25 billion across both long and short positions.

The recent downturn in Bitcoin’s price can be attributed to a more cautious stance from several officials at the Federal Reserve, who are advising against further interest rate cuts, citing persistently high inflation. This shift has diminished expectations for a rate cut next month, impacting Bitcoin and other risk assets, including stocks. Dawson suggested that “a powder keg of volatility in tech valuations” might push Bitcoin down to $75,000 by the year’s end, although he anticipates a quick rebound from that level.

A significant factor in the current market is the notable concentration of Bitcoin “puts,” with approximately 13,800 contracts available that allow holders to sell Bitcoin at a strike price of $85,000 by the expiry date of December 26. This activity reflects a growing demand for downside protection as Bitcoin struggles to maintain its value.

Despite the prevailing bearish sentiment, some market participants maintain a more optimistic outlook. Sean Farrell, head of digital asset strategy at Fundstrat, noted in a recent report that the “near-term risk/reward now looks more balanced.” He indicated that oversold signals are beginning to emerge as Bitcoin hovers near the $90,000 mark, describing it as a “potential value zone” that could attract buyers. Farrell also mentioned that the latest selloff has cleared the market of sellers who were forced to liquidate their positions.

While some indicators point to a possible rebound, others signal continued bearish trends. Bitcoin’s call-put “skew,” which measures market sentiment, has deteriorated, indicating a predominance of puts over calls. The 30-day put skew has dropped from -2.9 percent to -5.3 percent, showing that traders are increasingly willing to pay a premium for downside insurance as prices soften.

Options volatility across the board has surged. According to Dawson, 30-day implied volatility has risen from 41 percent to 49 percent within two weeks, while long-term volatility has increased from 46 percent to 49 percent. This spike in volatility highlights the uncertainty surrounding Bitcoin’s future.

Jack Janasiewicz, portfolio manager and lead portfolio strategist at Natixis Investment Managers Solutions, expressed a bearish view rooted in Bitcoin’s practical utility and mass adoption, despite acknowledging its growing institutional acceptance. He remarked, “Can you really buy coke with Bitcoin down the street? Sure, you can allocate 1 percent or 2 percent of your portfolio to Bitcoin in case it goes to $1 million.”

As the cryptocurrency market continues to navigate these turbulent waters, the outlook for Bitcoin remains uncertain, with analysts and traders closely monitoring developments in the coming weeks.