Bitcoin has impressively bounced back to over $71,000 following a significant sell-off, yet data from derivatives markets indicate that professional traders remain wary about the rally's longevity. Despite the rebound, there are lingering questions about whether the downturn has truly ended.
Key Observations:
Bitcoin's derivatives market reflects caution, with the options skew reaching 20%, as traders brace for potential further fund liquidations. Although Bitcoin has recouped some losses from its recent decline, it still lags behind the performance of gold and tech stocks, hindered by a lack of demand for leverage.
Since hitting a low of $60,150 on Friday, Bitcoin (BTC) has risen by 17%. However, metrics from derivatives suggest traders are hesitant, with a restrained appetite for prices above $70,000. Concerns linger over the liquidation of $1.8 billion in leveraged bullish futures contracts within five days, raising fears of significant hedge fund or market maker failures.
The recent dip contrasts with the October 2025 market crash, which saw record liquidations of $4.65 billion in Bitcoin futures. The current downturn has been characterized by three weeks of consistent downward pressure, despite bulls increasing their positions in the $70,000 to $90,000 range. This has led to a rise in aggregate futures open interest, despite liquidations due to margin shortfalls.
On major exchanges, the aggregate open interest in Bitcoin futures was 527,850 BTC as of Friday, remaining stable from the previous week. The notional value of these contracts fell to $35.8 billion from $44.3 billion, mirroring a 21% Bitcoin price drop over a week. This data suggests bulls are still adding positions despite the downward trend.
To gauge whether whales and market makers are turning optimistic, one can examine the BTC futures basis rate, which compares futures prices to spot prices. Typically, a 5% to 10% annualized premium is expected under neutral circumstances to account for longer settlement periods. However, the BTC futures basis rate dipped to 2% on Friday, its lowest in over a year, reflecting a lack of demand for bullish leverage.
In the options market, traders' lack of confidence in Bitcoin is evident. A high demand for put (sell) options signals bearish sentiment, pushing the skew metric above 6%. Conversely, when traders fear missing out, they prefer call (buy) options, causing the skew to turn negative. On Friday, the BTC options skew reached 20%, a level rarely sustained and indicative of market panic. For context, the skew was at 11% on November 21, 2025, after a 28% price drop from $111,177 to $80,620.
With no clear catalyst driving the current downturn, fear and uncertainty have intensified. Speculation persists that a major market entity may have collapsed, contributing to a lack of market confidence and suggesting a high likelihood of further price declines. As a result, sustained bullish momentum seems unlikely while Bitcoin derivatives metrics continue to signal extreme fear.
This analysis is intended for informational purposes only. Investors and traders should conduct their own research before making investment decisions, as all investments involve risk.