Underwater Supply Caps Bitcoin as Spot Sellers Fade Derivatives-Led Rallies

Bitcoin’s midweek pop didn’t stick. After opening Wednesday near $86,300, price jumped roughly 4.6% to briefly clear $90,200 before giving it back within minutes, slipping back toward $86,600 by the session’s end. With holiday liquidity thinning out, that round-trip says more about market structure than sentiment headlines.

The pivot point right now is the overhead supply from underwater holders. On-chain positioning shows a thick band of inventory between $93,000 and $120,000. Until price spends time above the 0.75 quantile—around $95,000—and then reclaims the short‑term holder breakeven near $101,500, rallies are likely to meet pre-set sell interest from holders eager to exit at or near cost. That behavior is rational, especially into year‑end, but it becomes self-reinforcing when liquidity is patchy.

Flow diagnostics support that interpretation. Buying pressure on Wednesday came largely from leveraged traders: open interest ticked higher and perpetual cumulative volume delta turned positive, per Velo data. The retrace was led by spot—spot CVD rolled over as sellers hit bids and absorbed the leverage-driven pop. Options and futures also look defensive: skew, open interest, and funding rates have been fading, consistent with de‑risking rather than appetite to press directional longs. In short, demand appears episodic and leverage-led; spot is selling the rips.

There is a cushion, for now. The “true market mean” around $81,500—the average cost basis for active investors—has absorbed pressure and helped prevent a deeper break. But supports are only as strong as the willingness of buyers to defend them repeatedly. If overhead supply keeps capping progress while macro volatility rises, that cushion can thin.

Macro isn’t providing clean tailwinds. The Bank of Japan’s rate hike this week adds another variable to a complex cross‑asset equation. Carry‑trade adjustments and de‑risking in traditional markets can spill over into crypto, particularly when order books are lighter. Into a low‑liquidity Christmas regime, these ripples often look larger than they are.

My read: this is a supply transition problem, not a narrative problem. Breaking a ceiling built by loss-holders usually requires sustained, unlevered bid to steadily absorb inventory—something spot CVD is not showing yet. Market makers and systematic liquidity providers tend to lean into that overhead, reinforcing mean reversion until price proves it can hold above $95,000 and then $101,500 with real spot flow. Until that happens, fast squeezes are likely to be sold and pullbacks will probe whether $81,500 still attracts responsive bids.

As for near-term catalysts, expectations are muted. “It’s unlikely we’ll see a significant ‘rocket jump’ for Bitcoin before the end of 2025, given the current bearish sentiment,” said Ryan Yoon of Tiger Research. A benign CPI print could still spark a short relief move as traders reassess inflation risk, but without a shift in spot participation, that kind of bounce often stalls into the same supply shelf.

Traders focused on structure will watch three things: spot CVD for evidence of persistent buying, options skew for signs that protection demand is easing, and whether price acceptance can migrate above $95,000. If those flip, the ceiling softens. If they don’t, range trading around a heavy top and a fragile $81,500 floor remains the base case.