Panic subsides, options market indicates Bitcoin crash may be ending

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The intense sell-off that has weighed heavily on Bitcoin over the past few weeks appears to be weakening, giving hope that the current slump in the crypto market may be nearing its end.

On Tuesday, Bitcoin held steady at around $88,000, rebounding from a seven-month low. The previous crash triggered massive forced liquidations and wiped out over $1 trillion in market capitalization from the entire crypto asset market.

Trader sentiment remains cautious, reflecting ongoing market fragility. This month, Bitcoin may still record its worst monthly performance since 2022, and Bitcoin ETFs may also see their largest monthly outflows since launch. However, after this mild rebound, some see reasons for optimism.

In the options market, the cost of buying downside protection has dropped sharply. Caroline Mauron, co-founder of Orbit Markets, said:

The premium for one-week put options compared to call options has fallen to around 4.5% from 11% last Friday (the 2025 high). This indicates that pressure has substantially eased, and investors expect we've temporarily bottomed out.

However, until the Federal Reserve makes its decision, the market is expected to remain in wait-and-see mode.

Long-term holders who sold above $100,000 now perceive current levels as too low and are no longer selling, returning to holding; meanwhile, investors trying to accumulate are waiting for Bitcoin to fall below $85,000 again.

Another key indicator is Bitcoin's 14-day Relative Strength Index (RSI), which is now at 32 after a sharp decline in early October. An RSI at 30 or below is usually considered oversold, while 70 or above represents the opposite. At the same time, the implied volatility of Bitcoin options, a measure of expected price swings, has returned to April's level, when tariff-related news triggered a wave of selling.

Noelle Acheson, author of the newsletter "Crypto is Macro Now", pointed out:

This shows traders are preparing for a breakout movement, which could go either direction. But option skew indicates that bets on a rebound from current levels are increasing compared to further declines.

Media data shows that global cryptocurrency exchange-traded products (ETPs) have seen over $6 billion in net outflows in November, the largest recorded monthly outflow since 2018. Nonetheless, most investors are holding their positions. U.S. Bitcoin ETFs have seen a total withdrawal of $3.7 billion this month, accounting for about 3% of their total $110 billion in assets under management.

According to a report by S3 Partners LLC, short positions in BlackRock's Bitcoin fund (IBIT) have fallen sharply.

BTC Markets analyst Rachael Lucas said mild trading volumes on Monday may also signal that selling pressure is weakening. She estimates Bitcoin's short-term support is at $80,000, with resistance zones between $90,000 and $95,000.

As investors face multiple concerns, including a cooling U.S. labor market and major companies' large-scale investments in AI capital spending, Goldman Sachs' risk appetite indicator shows that speculative assets, including Bitcoin, are under increasing pressure. Such a steep decline reflects evaporating risk appetite, and in extreme cases may even mean the market is experiencing excessive selling. Goldman Sachs strategists wrote:

Stocks with high valuations and overweight positions make the market more vulnerable to shocks, especially in sectors driven more by retail investors, such as unprofitable tech stocks.

U.S. tech stocks lifted global equities on Monday, and traders started a data-heavy week. According to interest rate futures, investors now see an 80% chance that the Federal Reserve will cut rates at its December meeting, compared to just 42% a week ago. Fed officials remain divided on whether to cut rates again after doing so in September and October.

Risk disclaimer and warningThe market has risks, and investment should be cautious. This article does not constitute personal investment advice and has not considered the specific investment goals, financial situation, or needs of individual users. Users should consider whether any opinions, viewpoints, or conclusions in this article fit their particular circumstances. If you invest based on this article, you do so at your own risk. ```