Key Takeaways
Is the Santa rally cancelled?
As of writing, the market was not pricing such an outcome; however, the Fed’s rate decision will be a key catalyst.
What’s next for BTC in the meantime?
Probably a choppy price action above $80k until the Fed rate decision in early December.
After a brutal 30% decline, Bitcoin [BTC] has steadied above $80k amid rising odds of another 25 bps Fed rate cut.
Despite the relief, however, the ‘Santa rally’ expectation has dropped, according to Jake Ostrovskis, Head of OTC (Over the Counter) trading at market maker Wintermute.
He cited the Options market positioning and added,
“The previously consensus view of a year-end ‘Santa rally’ has been priced out of the markets. Calls continue to roll down, topside bets are being capped below all-time highs.”
Source: X
It meant that calls (bullish bets) from big players like Paradigm have been trimmed and targets pushed lower, underscoring that big funds weren’t expecting an explosive move into a new ATH in December.
According to him, Options traders were pricing a mild bullish outlook of a jump to $100k-$118k, but nothing like an aggressive spike to the recent peak at $126k.
BTC sentiment and momentum
That said, the 25 Delta Risk Reversal (25RR), which tracks market sentiment, was negative for end-November (-4.8) and December (-4.9). This highlighted a premium for puts or hedging activity to year-end.
Source: Amberdata
Put differently, there was still short-term caution despite improving odds of a Fed rate cut. For Ostrovskis, a true Bitcoin bottom could be formed if the 25RR at least drops to neutral (zero).
For November, however, the top volumes for puts (hedging) were at $80k, $82k and $88k, further cementing that despite the market still expected price to defend the $80k support.
But for December, the most bullish bets in the past 24 hours were targeting a potential rally to $112k.
Source: Arkham
Even so, the Swissblock stated that despite BTC’s recovery to $89k earlier in the week, the momentum had not flipped to positive.
The analytics firm added that defending $85k could raise hopes of climbing higher.
“It (momentum) remains deeply negative, at levels typical of late-stage capitulation. Until momentum turns, every bounce is just a tactical reaction. An ignition becomes possible if BTC stabilizes above $85K–$86.5K.”
Source: Swissblock
On the demand front, ETF inflows have been uneven earlier this week. This choppiness has limited momentum and could keep BTC trading sideways in the near term.
Looking ahead, the Fed’s upcoming rate decision may determine whether the trend stabilizes or shifts direction.
Nic Puckrin, analyst at The Coin Bureau, shared a similar outlook. In an email statement to AMBCrypto, he said,
“The Fed holds the key to the market’s end-of-year finale – and its next rate decision will determine whether we get a Santa rally or a Santa dump.”
