Bears had an early Christmas following Bitcoin’s 23% drop in Q4 and were still aggressively positioning for more gains into the year-end.
According to CryptoQuant, the level of Bitcoin selling pressure has surpassed the dump in early 2025 during Trump’s tariff wars, as illustrated by a sharp drop in the Taker Buy Sell Ratio metric.
Bitcoin [BTC] short sellers have regained dominance in the past five days, as ETF demand further thinned out during the Christmas holiday and amid broader weak sentiment.
Since the 18th of December, U.S. Spot ETF products have recorded consecutive Daily Net Outflows. This has been part of the broader easing demand for ETFs since mid-October.
Open Interest on the Chicago Mercantile Exchange also declined sharply. It fell below $10 billion for the first time since September 2024, signaling a clear risk-off shift among institutional investors.
The drop in institutional participation largely stemmed from the breakdown of the basis trade. This strategy involves buying spot ETFs while shorting an equivalent position on CME futures to capture yield.
That yield peaked near 10% in early 2025. It has since fallen to around 5%, making the trade less attractive and riskier for hedge funds and other large players.
With limited ETF demand and the absence of any strong catalyst, some analysts have projected a potential dip below $80K in early 2026.
However, the leveraged shorts could be swiftly liquidated if BTC were to surge to $90,600. About $3 billion in leveraged shorts were parked at the level, with another immediate target at $88.7K in case of a liquidity hunt.
On the other hand, leveraged longs at $83.9K and $86.1K could also be liquidated if during a volatile wick down.
Interestingly, Option players were also betting on similar levels. According to Arkham data, the top Options volumes in the past 24 hours were concentrated at $85K for potential dip and $88K and $90K for potential rally targets.
Overall, the positioning eyed range-bound price action into the new year, with big players hedging actively for a downside risk to $85K again.
