Bitcoin has once again pulled back from its recent highs, retreating to around $94,500 after failing to sustain a breakout above $100,000. Despite bullish sentiment lingering from the post-election rally that pushed prices from $70,000 to nearly $99,500, multiple technical and on-chain indicators now suggest growing bearish pressure. Analysts are increasingly warning of a potential extended correction — one that could see BTC dip below the critical $90,000 support level.
This article explores three key signals pointing to downside risk in the near term: shifting options market sentiment, weakening U.S. demand reflected in exchange pricing, and bearish technical divergence in momentum indicators.
1. Options Market Signals: Traders Favor Protection Over Speculation
One of the clearest early warnings of a potential downturn comes from the derivatives market — specifically, the behavior of Bitcoin options traders on platforms like Deribit.
The 25-delta risk reversal (25RR) is a widely watched gauge of market sentiment. It compares the implied volatility of out-of-the-money (OTM) call options — used to bet on price increases — with OTM put options, which provide downside protection. When calls are more expensive than puts, the risk reversal turns positive, signaling bullish speculation. Conversely, when puts become relatively more expensive, the indicator turns negative — a sign traders are hedging against downside risk.
As of late November 2024, Bitcoin’s 25RR has turned negative for the first time in over a month. According to data from Amberdata, short-dated calls expiring this week now trade at a discount to puts. This shift indicates that sophisticated market participants are no longer aggressively betting on further upside. Instead, they’re purchasing protective puts or selling call spreads — strategies often used when anticipating price stagnation or decline.
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Notably, large trades on the over-the-counter (OTC) platform Paradigm show increased activity in bearish structures. On Monday alone, traders executed significant put purchases and call spread sales, reinforcing the narrative of growing caution among institutional players.
While long-dated options still reflect some optimism — particularly for Q1 2025 expiries — the cooling premium for near-term calls suggests short-term momentum may be fading.
2. Declining U.S. Demand: The Coinbase Premium Disappears
Another troubling sign for Bitcoin’s price trajectory is the erosion of demand from U.S. investors — a key driver behind the recent rally.
Historically, during periods of strong domestic buying pressure, Bitcoin trades at a premium on U.S.-based exchanges like Coinbase compared to offshore platforms such as Binance. This “Coinbase premium” typically emerges when American retail and institutional investors rush to buy BTC amid heightened news cycles or macroeconomic developments.
However, that premium has now evaporated — and reversed. As of late November 2024, Bitcoin is trading at a slight discount on Coinbase relative to Binance. This negative flip suggests weakening demand from U.S. buyers, possibly due to regulatory uncertainty, reduced liquidity, or profit-taking after the sharp run-up.
This shift is particularly concerning because the post-election surge from $70,000 to nearly $100,000 was largely fueled by renewed confidence among American investors following policy clarity and expectations of pro-crypto leadership changes.
With that momentum stalling, the absence of strong local buying creates a vacuum that offshore markets alone may not be able to fill — especially if global macro conditions turn less favorable.
Moreover, order book data shows a bearish skew in sell-side depth on major exchanges, indicating sellers are gaining control. This structural weakness increases vulnerability to negative news or sudden liquidations.
3. Technical Divergence: RSI Warns of Momentum Loss
Even as Bitcoin briefly touched new highs above $99,000 earlier in the week, technical analysts noted a troubling disconnect between price action and momentum — known as bearish RSI divergence.
The Relative Strength Index (RSI) is a momentum oscillator that measures the speed and change of price movements. Typically, when prices make a higher high, the RSI should follow suit. But in this case, while BTC’s price reached a fresh peak, the RSI failed to confirm it — instead forming a lower high.
This divergence suggests that buying pressure is weakening despite price advances. In many past cycles, similar patterns preceded significant pullbacks.
On the daily chart, this bearish signal aligns with resistance near $100,000 — a psychological and technical barrier that has repelled multiple attempts at breakout. Combined with declining volume on up-moves and rising volume on down-moves, the technical picture points to distribution rather than accumulation.
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That said, support levels remain intact for now. Intraday charts suggest strong demand between $87,000 and $88,000, which could act as a floor during any deeper correction. This zone corresponds with previous resistance-turned-support and aligns with key moving averages on weekly timeframes.
Longer-term technical studies still favor a bullish outlook — especially with spot Bitcoin ETF inflows resuming and mining fundamentals remaining strong — but short-term traders should prepare for increased volatility.
Frequently Asked Questions (FAQ)
Q: What does a negative 25-delta risk reversal mean for Bitcoin?
A: A negative 25RR means put options are more expensive than call options at the 25-delta level, indicating traders are prioritizing downside protection over upside speculation. It often signals caution or bearish positioning ahead of potential price declines.
Q: Why is the Coinbase premium important?
A: The Coinbase premium reflects relative demand between U.S. and global markets. A sustained premium indicates strong domestic buying interest, often driving price rallies. Its disappearance or reversal can signal waning U.S. investor enthusiasm — a key concern given America’s influence on crypto markets.
Q: How reliable is RSI divergence as a predictor?
A: While not foolproof, RSI divergence has historically been a strong warning sign of trend exhaustion. When price makes new highs but momentum doesn’t confirm, it suggests underlying weakness that can lead to corrections — especially when combined with other bearish indicators.
Q: Could Bitcoin still reach $100K despite these warnings?
A: Yes — short-term pullbacks don’t negate long-term bullish potential. If macro conditions improve (e.g., rate cuts, ETF inflows accelerate), BTC could retest $100K. However, overcoming resistance will likely require stronger volume and renewed speculative interest.
Q: What factors could trigger a drop below $90K?
A: A combination of weak U.S. demand, negative derivatives sentiment, and breakdown in technical support could push prices lower. Catalysts might include poor economic data, regulatory headlines, or broader risk-off sentiment in financial markets.
Q: Where is support if Bitcoin falls below $90K?
A: Key support lies between $87,000 and $88,000. Below that, the next major zone is near $82,500 — aligned with the 200-day moving average on weekly charts — though reaching that level would require significant selling pressure.
Final Outlook: Caution Before the Next Leg Up
While Bitcoin’s long-term fundamentals remain robust — supported by adoption trends, scarcity dynamics, and growing institutional interest — the short-term path appears increasingly uncertain.
The confluence of fading options market optimism, declining U.S. demand, and bearish technical divergence paints a picture of an overheated market in need of consolidation. A drop below $90,000 is no longer an outlier scenario but a plausible outcome in the coming weeks.
Traders should monitor key levels closely and consider risk management strategies such as stop-loss placement or hedging through derivatives.
For investors with a longer horizon, dips may present buying opportunities — provided they align with broader portfolio strategy and risk tolerance.
As always in crypto markets, volatility is not a bug — it’s a feature. Those who prepare for pullbacks are best positioned to benefit when momentum returns.