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

Bitcoin is on the verge of closing 2025 in the red if it fails to close above $94k by New Year’s Eve.

The oldest and largest cryptocurrency has declined by 5.7% in 2025. It recorded a lacklustre performance during Christmas week, while the U.S equities market rallied to new highs.   

And traders are now cautious, with some worried that the muted Bitcoin performance may extend into early January.  

Near-term BTC caution

According to the Options analytics platform Leavitas, short-term positioning implied choppy markets, with a preference for downside protection among sophisticated players.

This was illustrated by the 1-week 25-Delta Risk Reversal (RR, orange) drop, underscoring renewed demand for hedging or puts (bearish bets).  

Source: X/Laevitas

In fact, all the tenors (1 week to 1 year) were negative, implying that institutions preferred hedging over betting on a sharp upside or breakout scenario.      

For a positive shift in market sentiment and renewed bullish momentum, the 25-Delta RR should ease back to 0 or turn positive. 

According to Singapore-based crypto trading desk, QCP Capital, a firm direction for BTC could be formed after liquidity returns. 

“With open interest down roughly 50% post-expiry (Dec 26), conviction remains limited. Capital is sidelined, and direction likely waits for liquidity to return.”

Institutional BTC demand wanes

The cautious positioning in the Options market also reflected a similar trend in institutional demand. In late 2025, U.S Spot ETF outflows hit a total of $5.5 billion – The highest since they debuted in 2024. 

Source: CryptoQuant

However, the outflows appeared to be driven by hedge funds exiting positions after the lucrative basis trade yield dropped by half from 10% to 5%. 

In fact, cumulative inflows into the ETFs were only down 9% from their October high of $62 billion. Put differently, there is still some long-term conviction among most ETF holders despite the Q4 drawdown. 

Source: Bloomberg/Galaxy Research 

That being said, the Q4 2025 market rout has been accelerated by several factors, including the 10 October crash and the MSCI index review of BTC treasury firms. 

With the risk of MSCI delisting Strategy still high at +75% in Q1 2025, the market could remain range-bound until the outcome in mid-January. 

For its part, BTC has remained pinned below $90,000 since mid-December, with an overhead resistance at $94,000. This sideways structure may extend into early January.

Source: BTC/USDT, TradingView

 Final Thoughts

• Option traders were betting that the BTC sell-off may have eased, but the price range of $85k-$94k could extend into early 2026.
• ETF outflows reached a record $5.5 billion in Q4 2025, yet long-term conviction has remained.