Bitcoin weakens with sideways movement—will a major volatility surge follow?
TechFlow Selected TechFlow Selected
Bitcoin weakens with sideways movement—will a major volatility surge follow?
Market direction depends on whether liquidity improves and sellers step back, or if the current time-driven bearish pressure persists.
Navigating Web3 tides with focused insightsAuthors: Chris Beamish, CryptoVizArt, Antoine Colpaert, Glassnode
Translation: AididiaoJP, Foresight News
Bitcoin remains trapped within a fragile range, with unrealized losses increasing, long-term holders selling, and demand remaining persistently weak. ETFs and liquidity remain subdued, futures markets are soft, and options traders are pricing in short-term volatility. The market is currently stable but continues to lack confidence.
Summary
Bitcoin remains in a structurally fragile range, pressured by rising unrealized losses, elevated realized losses, and significant profit-taking from long-term holders. Despite this, demand has anchored prices above the true market mean.
The market has failed to reclaim key thresholds, particularly the Short-Term Holder Cost Basis, reflecting ongoing selling pressure from both recent buyers and seasoned holders. If signs of seller exhaustion emerge, a retest of these levels in the near term is possible.
Off-chain indicators remain weak. ETF flows are negative, spot liquidity is thin, and futures positioning reflects insufficient speculative confidence, making prices more sensitive to macro catalysts.
The options market shows a defensive posture, with traders buying short-term implied volatility (IV) and consistently demonstrating demand for downside protection. Volatility surface signals indicate short-term caution, while longer-dated sentiment appears more balanced.
With the FOMC meeting serving as the final major catalyst of the year, implied volatility is expected to gradually decay through late December. Market direction hinges on whether liquidity improves and sellers step back, or if this time-driven bearish pressure persists.
On-Chain Insights
Bitcoin entered the week still confined within a structurally fragile range, bounded above by the Short-Term Holder Cost Basis ($102.7K) and below by the True Market Mean ($81.3K). Last week, we highlighted weakening on-chain conditions, thin demand, and a cautious derivatives landscape—echoing market dynamics seen in early 2022.
Although price barely holds above the True Market Mean, unrealized losses continue to expand, realized losses are rising, and spending by long-term investors remains high. The critical upper level to reclaim is the 0.75 Cost Basis Quantile ($95K), followed by the Short-Term Holder Cost Basis. Until then, absent new macro shocks, the True Market Mean remains the most likely area for bottom formation.
Time Works Against Bulls
The market remains in a mildly bearish phase, reflecting tension between modest capital inflows and persistent selling pressure from高位 buyers. As the market drifts within a weak but bounded range, time becomes a negative force, making it harder for investors to endure unrealized losses and increasing the likelihood of realizing losses.
Relative Unrealized Loss (30-day simple moving average) has risen to 4.4%, having remained below 2% for nearly two years prior—marking a shift from a euphoric phase to one of heightened stress and uncertainty. This indecision currently defines the trading range, and resolution will require fresh liquidity and demand to restore confidence.
Mounting Losses
This time-driven pressure is even more evident in spending behavior. Although Bitcoin has rebounded from its November 22 low to around $92.7K, adjusted entity-adjusted 30-day SMA Realized Loss continues to climb, reaching $555 million per day—the highest level since the FTX collapse.
Sustained high realized loss during a modest recovery reflects growing frustration among高位 buyers who are capitulating during strength rather than holding through the bounce.
Blocking Reversal
Rising realized losses further hinder recovery, especially when coinciding with surging realized profits from seasoned investors. During the recent rally, Realized Profit (30-day SMA) from holders with >1 year of holding surpassed $1B per day, peaking above $1.3B at a new all-time high. These dual forces—capitulation from高位 buyers and large-scale profit-taking from long-term holders—explain why the market struggles to reclaim the Short-Term Holder Cost Basis.
Nevertheless, despite such strong selling pressure, price has stabilized and even edged slightly above the True Market Mean, suggesting that sustained and patient demand is absorbing the sell-side flow. In the short term, if signs of seller exhaustion appear, this latent buying pressure could drive a retest of the 0.75 quantile (~$95K) and potentially the Short-Term Holder Cost Basis.
Off-Chain Insights
ETF Struggles
Moving to the spot market, U.S. Bitcoin ETFs experienced another quiet week, with three-day average net flows remaining negative. This continues the cooling trend since late November, marking a clear departure from the strong inflow regime that supported price gains earlier in the year. Stable redemptions across multiple major issuers highlight a more risk-averse stance by institutional allocators amid broader market uncertainty.
As a result, the demand buffer in the spot market has thinned, reducing immediate buyer support and making prices more vulnerable to macro catalysts and volatility shocks.
Liquidity Remains Low
Parallel to weak ETF flows, Bitcoin’s spot relative volume continues to hover near the lower end of its 30-day range. Trading activity has steadily declined from November into December, reflecting falling prices and reduced market participation. Shrinking volume indicates a more defensive overall market posture, with fewer liquidity-driven flows available to absorb volatility or sustain directional moves.
With the spot market calming down, attention now turns to the upcoming FOMC meeting, which could serve as a catalyst to reignite market engagement depending on its policy tone.
Futures Market Slump
Continuing the theme of low participation, the futures market also shows limited interest in leverage, with open interest failing to rebuild materially and funding rates holding near neutral levels. These dynamics underscore a derivatives environment defined by caution rather than confidence.
In the perpetual contract market, funding rates hovered around zero to slightly negative this week, highlighting an ongoing exodus from speculative long positions. Traders maintain balanced or defensive stances, applying almost no directional pressure via leverage.
With derivatives activity subdued, price discovery leans more heavily on spot flows and macro catalysts rather than speculative expansion.
Short-Term Implied Volatility Spikes
Turning to the options market, Bitcoin’s muted spot activity contrasts sharply with a sudden rise in short-term implied volatility, as traders position for larger price moves. Interpolated Implied Volatility (estimating IV via fixed Delta values rather than relying on listed strike prices) offers a clearer view of how risk is priced across maturities.
For 20-Delta call options, one-week IV rose approximately 10 volatility points week-on-week, while longer-dated tenors remained relatively flat. A similar pattern emerged in 20-Delta puts, with short-term downside IV rising while longer terms stayed calm.
Overall, traders are accumulating volatility where they expect stress—preferring to hold convexity rather than sell premium ahead of the December 10 FOMC meeting.
Downside Demand Returns
Accompanying the rise in short-term volatility is a renewed premium on downside protection. The 25-delta skew—a measure of the relative cost of puts versus calls at the same Delta—has climbed to around 11% for one-week tenors, indicating significantly increased demand for short-term downside insurance ahead of the FOMC meeting.
Skew remains tightly clustered across tenors, ranging between 10.3% and 13.6%. This compression suggests a broad-based preference for put protection across the curve, reflecting a consistent risk-off bias rather than isolated short-end pressure.
Volatility Accumulation
In summary, weekly flow data reinforces a clear pattern: traders are buying volatility, not selling it. Option premiums bought dominate total nominal flows, with puts slightly leading. This does not reflect directional bias but rather a state of volatility accumulation. When traders buy both sides simultaneously, it signals hedging and convexity-seeking behavior rather than sentiment-driven speculation.
Combined with rising implied volatility and downside-skewed skew, the flow picture indicates market participants are preparing for volatile events with a bearish tilt.
After FOMC
Looking ahead, implied volatility has already begun to ease, and historically, once the final major macro event of the year passes, IV tends to compress further. With the December 10 FOMC meeting acting as the last meaningful catalyst, the market is poised to transition into a low-liquidity, mean-reverting environment.
Post-announcement, sellers typically return, accelerating the decay of IV into year-end. Absent a hawkish surprise or significant shift in guidance, the path of least resistance points toward lower implied volatility and a flatter volatility surface through late December.
Conclusion
Bitcoin continues to trade within a structurally fragile environment, with rising unrealized losses, high realized losses, and substantial profit-taking from long-term holders collectively anchoring price action. Despite persistent selling pressure, demand retains enough resilience to keep prices above the True Market Mean, indicating that patient buyers continue to absorb supply. If early signs of seller exhaustion emerge, a near-term move toward $95K and the Short-Term Holder Cost Basis remains possible.
Off-chain conditions echo this cautious tone. ETF flows remain negative, spot liquidity is low, and futures markets lack speculative engagement. The options market reinforces a defensive stance, with traders accumulating volatility, buying short-term downside protection, and positioning for near-term volatility ahead of the FOMC meeting.
Collectively, market structure reflects a weak but stable range, supported by patient demand yet constrained by ongoing selling pressure. The short-term path depends on whether liquidity improves and sellers retreat, while the longer-term outlook hinges on whether the market can reclaim key cost basis thresholds and exit this time-driven, psychologically taxing phase.
Join TechFlow official community to stay tuned
Telegram:https://t.me/TechFlowDaily
X (Twitter):https://x.com/TechFlowPost
X (Twitter) EN:https://x.com/BlockFlow_News
@glassnode
