On January 4th, in the East 8 Time Zone, Bitcoin encountered resistance again after breaking above $48,000, briefly falling below $44,000 during the day, with a daily fluctuation exceeding 8%. Against the backdrop of cautious sentiment in traditional markets, this once again brought the risk appetite of the crypto market to the forefront. Accompanied by sharp price swings, implied volatility in options continued to rise, showing signs of intensified "high-level long-short hedging" in both BTC and ETH near-month contracts. Meanwhile, the slight increase in U.S. Treasury yields and the U.S. dollar index released after the U.S. stock market closed sparked a rapid rise in discussions about whether the market would peak before the halving. Overall, this round of price surge and retreat was not solely due to a single transaction breaking through liquidity, but rather a result of multiple factors resonating, including a slowdown in ETF fund inflows, increased options protection, and fluctuating macro expectations.
Resonance of ETF and Derivative Signals
● In terms of fund movements, spot and futures trading volumes have both increased. In the past 24 hours, Bitcoin's total network trading volume surged to about 1.5 times the average of the previous week. After leveraged longs concentrated their positions above $48,000, the price drop triggered large-scale liquidations, with the total network contract liquidation amount nearing hundreds of millions of dollars, significantly skewed towards longs, reflecting that chasing high prices put pressure on funds during the short-term price correction.
● On the ETF signal front, the net inflow of BTC-related products in the U.S. market has significantly cooled compared to last week. Public data indicates that mainstream Bitcoin-related ETFs saw a net inflow drop of several dozen percentage points from previous highs in the last trading week, suggesting that the pace of passive allocation by institutions has slowed, and incremental funds have begun to shift from "mindless buying" to more refined position management, with ETF funds no longer solely supporting prices.
● The options market shows that demand for protective put options is heating up. The implied volatility of near-month ATM and OTM puts for BTC is generally higher than that of calls, with the inversion of put/call IV for the same term widening, indicating that funds are more inclined to hedge potential downside risks by buying protective puts after price surges, rather than continuing to chase upside through call options.
● In terms of term structure, short-term implied volatility has significantly risen. From the 7-day, 30-day, and 90-day annualized IV curves, the front-end curve is steeply upward, with short-term IV premiums expanding to double-digit percentages compared to the long end, reflecting that the market is pricing in "intense volatility in the coming weeks" far more than the uncertainty of medium to long-term trends. This structure typically corresponds to a tug-of-war phase in a high-level consolidation range.
● The futures basis and funding rates are showing signs of "cooling from high levels." The funding rates for perpetual contracts on mainstream exchanges have gradually retreated from previous highs of annualized several dozen percentage points, with some periods even approaching neutrality. The premium rate of March contracts and the spot price difference have also fallen from previously overheated levels, indicating that the sentiment of high-leverage longs is cooling, and the overall market leverage is showing a slight trend of deflating.
Macro Liquidity and Crypto Cycle Misalignment
This round of Bitcoin's surge and retreat occurred in a macro environment that is not extremely loose. The latest U.S. inflation and employment data remain in a "not yet easing" range. Although the Federal Reserve has signaled the possibility of future rate cuts in its dot plot, expectations for the timing of the first rate cut have adjusted from overly optimistic to a more neutral level, and market estimates for the number of rate cuts this year have also converged from previous aggressive pricing. In this context, the U.S. dollar index and U.S. Treasury yields have strengthened, indicating that the short-term downward space for global risk-free rates is limited, making it difficult for the overall valuation expansion of risk assets to rely entirely on the old logic of "liquidity flooding."
For the crypto market, there is a certain misalignment between macro liquidity and its own cycle. On one hand, Bitcoin is approaching its next halving, and based on the experience of the previous three cycles, the period before and after the halving often amplifies expectation-driven market effects, especially under the narrative of halving the supply growth rate, which significantly boosts on-chain activity and off-chain attention. On the other hand, in this cycle, the entry of spot-related ETFs, compliant institutions, and increased penetration of derivatives have further enhanced the correlation between Bitcoin and traditional financial markets, making it more susceptible to changes in interest rate expectations, global stock market sentiment, and even marginal regulatory policies while enjoying the premium of "digital gold." In other words, this round of price movements is increasingly difficult to classify as a "pure halving market," but rather resembles a composite rhythm woven from the three factors of "macro volatility + compliance process + internal cycle," with repeated tug-of-war at high levels largely seeking a new equilibrium for this misalignment.
Long FOMO and High-Level Hedging Tug-of-War
Surrounding this round of surge and retreat, there are clear divisions within the market. The more optimistic side argues that while current prices are far from last year's lows, there is still considerable space from historical highs from a cyclical perspective, and the period before and after the halving is often the most imaginative phase of the story. Additionally, the launch of compliant products has opened up allocation channels for traditional institutions, and even if short-term ETF net inflows have slowed, as long as there is no sustained large-scale net outflow, it can be seen as a process of "oscillating to digest positions." Under this logic, bulls tend to view every sharp drop as an opportunity for "left-side accumulation," emphasizing that as long as there is no systemic increase in selling pressure, prices still have a chance to push into higher ranges supported by positive narratives and long-term demand.
The more cautious faction, however, warns that the amplified volatility in high-level areas itself is a risk signal. The rising demand for protective puts in the options market and the steep upward trend in front-end implied volatility indicate that professional funds are more concerned with "locking in pullbacks" rather than blindly chasing upward space. At the same time, the cooling of ETF net inflows means that the supporting effect of passive buying on prices is weakening. Once prices break below certain key technical levels, the stop-loss and liquidation of leveraged longs hanging below may amplify the downward trend, creating a "liquidity vacuum" inertia. From this perspective, the current position resembles a "right-side hedging" time window, where it is preferable to retain some cash and low-leverage positions rather than bear asymmetric downside risks during periods of amplified volatility.
Key Time Windows and Risk Points
From the time dimension of the next few trading weeks, the market will focus on several key variables in the short term. First, on the macro level, speeches from Federal Reserve officials and the upcoming core inflation and employment data will continue to influence rate cut expectations. If the market's hopes for "rapid rate cuts within the year" are revised again, the repricing on the interest rate side may transmit to Bitcoin prices through ETF and risk appetite channels. Second, the performance of funds will be crucial; whether mainstream Bitcoin-related ETFs can maintain moderate net inflows during the consolidation period or experience consecutive days of net outflows will directly impact the stability of high-level positions. Additionally, changes in the holding structure of options and futures also need to be closely monitored. If short-term implied volatility continues to rise and protective puts further concentrate in a certain price range, it may signal that a larger volatility window is brewing.
For participants, the core risk in the upcoming period lies in the "false breakouts and true pullbacks" brought about by high-level volatility expansion. Even if prices once again challenge previous highs or slightly break through, it does not necessarily mean that a new unilateral trend has been established. In an environment with deep participation in derivatives, sharp ups and downs are more likely to quickly wash out high-leverage positions. Relatively speaking, a prudent approach is to clarify one's holding logic for different cycles: short-term traders need to respect volatility pricing, strictly control leverage and stop-losses, while medium to long-term holders should pay more attention to the halving process, compliance advancement, and central changes in macro policies, without being swayed by daily fluctuations of several thousand dollars. Only by understanding the sources of volatility and one's own risk tolerance can high-level oscillations avoid devolving into chaotic emotional amplifications.
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