Bitcoin’s Holiday Slump Defies Seasonal Rally Hopes

As U.S. equity markets celebrate record-breaking highs in the S&P 500, Bitcoin finds itself sidelined during the typically festive period. The leading cryptocurrency is trading near $87,500, a figure that places it roughly 30% below its all-time peak reached in October. This performance marks its weakest fourth quarter since 2018, with stagnation replacing the anticipated year-end surge.

Two primary factors are contributing to the current inertia. First, trading volumes have thinned significantly due to the holiday season, a recurring annual pattern. In these conditions of reduced liquidity, even modest buy or sell orders can exert an outsized influence on price, amplifying volatility.

More notably, a key source of demand has reversed course. After months of sustained inflows, U.S. spot Bitcoin ETFs witnessed nearly $500 million in net outflows last week alone. This shift indicates that institutional buyers, who had been a major driving force, are now stepping back. Whether this move is motivated by year-end tax considerations, portfolio rebalancing, or risk management remains unclear, but its market impact is evident.

A Multi-Billion Dollar Options Expiry Looms

Market attention is sharply focused on December 26th, when a massive batch of Bitcoin options contracts—valued at approximately $23.8 billion—is set to expire. Such a substantial expiry event often acts as a gravitational pull on the spot price, causing many traders to adopt a wait-and-see approach rather than initiate new positions. Historically, periods following these large-scale expiries are characterized by heightened volatility as participants recalibrate their strategies.

Should investors sell immediately? Or is it worth buying Bitcoin?

From a technical perspective, Bitcoin is currently confined to a narrow trading band between $84,500 and $88,000. The psychologically significant $90,000 threshold remains elusive. A more concerning signal for analysts is the asset’s position well below its 365-day moving average, which stands near $102,000. This technical posture suggests bearish sentiment is currently in control.

Underlying Structural Progress Amid Price Weakness

Despite the discouraging price action, longer-term structural developments within the cryptocurrency ecosystem continue to advance. Notably, several U.S. banks are reportedly exploring the possibility of accepting Bitcoin as collateral for margin lending. While such institutional integration does not produce immediate price appreciation, it lays the groundwork for new use cases and could significantly broaden adoption by 2026.

This view of a foundation-building phase is echoed by investment manager VanEck, which forecasts a "consolidation period" for Bitcoin in the coming year, with a potential recovery materializing later. Concurrently, the stablecoin sector continues to experience robust growth. This trend suggests that capital is not exiting the digital asset space entirely but is being temporarily reallocated into less volatile instruments within the same ecosystem.

The immediate test for Bitcoin’s price stability will be the $85,000 support level, with its durability likely to be challenged in the trading sessions following the holidays. Whether the market finds a floor here or requires further declines to rekindle institutional demand will be a defining narrative for the first weeks of the new year.