Bitcoin (BTC) was trading around $73,500 on Wednesday, marking its fifth straight weekly loss. Options traders are now pricing in a higher likelihood of the cryptocurrency dropping below $70,000 by Christmas than climbing above $80,000. Last Wednesday, the odds of an $80,000-plus finish were at 53%, but they have since fallen to 26%, according to Derive founder and CEO Nick Forster. Conversely, the chance of a sub-$70,000 Christmas finish has risen from 15% to 31%.
Forster noted that traders are becoming increasingly defensive, with downside protection (puts) costing more than equivalent upside exposure (calls). Bitcoin options trading on Derive totaled $418 million last week, a 37% increase, with puts accounting for 55% of premiums traded compared to the previous week's share of 36%. One notable trade involved a wallet spending approximately $14,000 to protect 300 BTC against a fall below $60,000 by November 27, a position that could pay up to $3 million if bitcoin falls below $50,000.
Bitcoin dropped back below $74,000 on Tuesday following the release of October's U.S. consumer price index, which showed prices increased 0.4% during the month against expectations of 0.3%. Futures traders are now pricing in further Fed tightening at the December meeting. This followed more than $1 billion in crypto long liquidations on Monday as bitcoin fell below its 50-week moving average.
K33's latest research report indicated that perpetual futures open interest stood at around 353,000 BTC on Tuesday, a level only higher on 1.2% of trading days over the previous two years. Over the past 30 days, open interest increased 12%, while bitcoin lost 10%. K33 Head of Research Vetle Lunde noted that a breakdown could trigger substantial long liquidations, while a recovery could fuel short covering, amplifying price moves as leveraged positions unwind. Lunde described the market as 'ripe for a squeeze.'
K33 also noted a 0.75 correlation between bitcoin and the Nasdaq over 30 days, a reading in the 99th percentile since 2020. Reviewing 16 previous strong Nasdaq rebounds from market corrections, bitcoin gained in eight of the nine that continued higher, with a median return of 2.9% over 20 days. Bitcoin fell in each of the seven failed rebounds, with a median loss of 21% in the following 20 days.
U.S. spot bitcoin ETFs recorded net outflows of $1.28 billion last week, with a further $296 million exiting the ETFs on Monday and Tuesday. Global bitcoin ETPs have recorded withdrawals of 31,652 BTC over the past seven trading days.