Traditional markets are in correction mode, with some investors running for the exits and others staying calm, noting that the markets had gotten too hot. The artificial intelligence trade is emblematic of the decline, as pundits wonder if the AI sector is now overhyped.
Crypto has not escaped unscathed, and Bitcoin has recently dropped below $90,000, before rebounding, hitting a level it had not seen in recent months.
Jean-David Pequignot, Chief Commercial Officer at Deribit (part of Coinbase), says crypto is mired in a “severe corrective phase.” While this may be obvious, Pequignot cautions that the crypto correction is not only erasing 2025 gains but also taking out critical support levels.
It is fueling legitimate fears of a deeper bearish trend, with the next downside levels to watch at $83–$85k as a potential confirmation zone, and even $74.5k if trend breakdown is cemented. A weekly close below the 50-week moving average would only reinforce this medium-term bearish bias,” says Pequignot.
It is not just Bitcoin as Ether hovers and Solana tests $130.
“Macro uncertainty is the dominant driver: December Fed rate cut odds have dropped to [around] 50% (from nearly 70% earlier this month), reflecting sticky inflation, mixed labor signals, and a data backlog post-government shutdown.”
Bitcoin ETFs are experiencing significant outflows, topping $2.3 billion – apparently the second largest liquidation to date.
“With this backdrop, options reflect caution heading into year-end. Short-date puts with strikes at $84k to $80k have seen the largest trading volumes today. Front-end implied volatility sits around 50% and the curve shows a heavy put skew (+5%-6.5%) for downside protection,” says Pequignot. “Contrary to market-wide perpetuals open interest, Bitcoin options open interest on Deribit remains elevated at around $42 billion. The December EOY expiry on Deribit shows lingering bullish call interest at lofty strikes ($140k–$200k), but near-term positioning is defensive. However, with a Fear & Greed index around 15 and an RSI nearing 30 (oversold but not yet extreme), whale wallets (>1,000 BTC) have increased notably in the past week, hinting at smart-money accumulation at undervalued levels.”
While it is all gloom and doom for the moment, Pequignot notes that “extreme setups” like we are currently experiencing have “rewarded the bold,” in the past.