The prediction market data is rapidly cooling, with the probability of Bitcoin breaking $100,000 by the end of the year dropping from a recent 45% to a collective wait-and-see approach among traders before the year's end. Polymarket prediction contracts show that the probability of betting on Bitcoin breaking $100,000 by the end of 2025 has fallen to 45%, while the probability of it dropping below $80,000 has reached 34%.
In early December, Bitcoin's price plummeted by 7%, having adjusted about 31% from the historical high on October 6, with the entire cryptocurrency market's market capitalization evaporating by over a trillion dollars.
1. The thermometer of the prediction market
● The prediction market, as a barometer of sentiment in the crypto space, is clearly recording the entire process of declining investor confidence. On the Polymarket platform, the prediction data regarding whether Bitcoin can return to $100,000 before the end of the year is stuck at 45%, which is close to a 'fifty-fifty' hesitation state.
● Behind this data lies a collective psychological shift among market participants. Meanwhile, the probability of a more aggressive target forecast of $110,000 is only 17%, while the proportion of participants who believe a deep correction below the $80,000 threshold will occur has reached 34%.
● Some market observers pointed out: "A 45% probability is essentially a gambler's mentality, and no one truly dares to go all in." This state of divergence reflects a complex sentiment that neither fully dares to be bearish nor has confidence in new highs.
Two, dual pressure of price and structure
● The Bitcoin market is undergoing a comprehensive stress test from technical to fundamental aspects. On December 1st, Bitcoin experienced a sharp drop, falling from around $90,000 to about $83,600. This crash was accompanied by more than $500 million in long positions being forced liquidated, pushing the market fear index closer to the 'extreme fear' zone.
● From a technical indicator perspective, Bitcoin's technical structure has undergone substantial changes. Analysts point out that the 50-day moving average has crossed below the 200-day moving average, forming a typical 'death cross,' which is a clear signal of a medium-term trend reversal.
● Meanwhile, the ADX indicator measuring trend strength has risen to 40, indicating that the market is entering a clear and fast trend.
Three, the retreat of institutional funds
● The attitude of institutional investors towards Bitcoin has undergone subtle changes in December, directly reflected in fund flow data. AiCoin data shows that in December, Bitcoin spot ETFs experienced net outflows of up to $3.5 billion, the worst month since February. More detailed data shows that just in the first few days of December, institutions withdrew over $250 million from Bitcoin ETFs.
● ETFs, as the main tool for traditional funds to allocate into cryptocurrencies, often represent the attitude of 'long money' through their inflows and outflows. Continuous outflows of funds mean that the pace of external incremental funds has clearly slowed down, and institutional investors may be reassessing the positioning of cryptocurrencies in their portfolios.
Four, dangerous signals in the derivatives market
● Abnormal phenomena in the derivatives market cast more shadows over Bitcoin's price prospects. Bitcoin has experienced a 'futures discount' phenomenon, where futures prices are lower than spot prices. This situation usually indicates pressure in the market, extreme fear, or intense hedging activity. The last time this occurred was in August 2023, when the news of Grayscale ETF triggered a massive sell-off.
● The three-month rolling annualized basis has dropped to around 4%, the lowest level since November 2022. This basis measures the annualized return obtainable through basis trading, that is, traders buy Bitcoin spot and sell futures contracts expiring in three months.
● In the bull market phase, traders are willing to pay higher fees for forward risk exposure, which drives up the basis. And during periods of extreme market enthusiasm, the curve may turn into steep futures contango.
Five, constraints of the macro environment
● December's macroeconomic agenda is dense, adding more uncertainty to Bitcoin's price. This month's market direction will depend on several key macro events: U.S. CPI, unemployment data, FOMC meeting, Bank of Japan's interest rate decision, and Powell's speech.
● Recently, Japanese central bank officials rarely indicated that they might consider raising interest rates, a statement that quickly sparked global concerns about a potential reversal of 'yen carry trades.' If investors have to buy back yen instead of continuing to borrow yen to purchase U.S. stocks or crypto assets, global risk markets could enter a period of 'passive deleveraging.'
Six, is a market bottom forming?
● In a sea of pessimism, some analysts are trying to find signals that the market may be bottoming. Caladan's research director Derek Lim believes that Bitcoin is likely to fluctuate within a certain range, with prices consolidating between $83,000 and $95,000.
● Tim Sun, a senior researcher at HashKey Group, pointed out that Bitcoin is unlikely to start a sustained upward unilateral trend before the end of 2025; a more realistic scenario might be 'struggling to find a bottom shape.'
● Notably, Vanguard, the asset management giant that has long viewed cryptocurrencies as 'speculative assets' and kept them at arm's length, suddenly announced it would open crypto ETF trading to clients. This shift occurs against the backdrop of the crypto market having evaporated over a trillion in market value since October, its signal significance is complex.
Seven, the challenges of liquidity and market depth
● The liquidity situation in the Bitcoin market is deteriorating, further exacerbating price volatility. The 'market depth' of the Bitcoin order book hovered around $568.7 million last weekend, down from the peak of $766.4 million in early October.
● This means that the market depth has dropped nearly 30% over the past month. Market depth is an indicator of the resistance of prices to large transactions causing volatility; a decrease in depth means that any large transaction will bring about greater price fluctuations.
● Concerningly, the scale of leveraged trading is currently at a high level, creating a hidden market trigger point. In a situation of insufficient market depth, the liquidation of high-leverage positions may trigger a chain reaction, further amplifying price fluctuations.
Eight, year-end outlook and investment strategy
Faced with a complex market environment, analysts hold a cautious attitude towards Bitcoin's year-end trend. Multiple analysts predict that Bitcoin will find it difficult to open a sustained upward unilateral trend before the end of 2025.
● Caladan's Lim compared the current situation with that of 2019, when risk assets saw significant increases about 6 to 12 months after the Federal Reserve ended its last quantitative tightening cycle.
● However, some analysts still believe that Bitcoin is in a bull market correction rather than a bear market. Sun explained that a real bear market is usually accompanied by a significant withdrawal of long-term funds from the market, a collapse of market narrative, and large-scale withdrawals by institutions.
● Lim warned that if the price of Bitcoin falls below $75,000, it could trigger a more severe sell-off.
The speed of the shift in market sentiment is as fast as lightning. A few days before Bitcoin's decline, Myriad predicted that most traders in the market still believed Bitcoin 'would first reach a new high of $100,000.' However, after the downward trend appeared, this expectation flipped instantly, with nearly half betting on 'first dropping back to $69,000.'
Institutional funds are quietly withdrawing, with December Bitcoin ETF net outflows reaching $3.5 billion, the worst performance since February. On technical charts, the 50-day moving average has crossed below the 200-day moving average, forming a medium-term bearish signal known as a 'death cross' among traders.
The balance of the market is tilting towards the cautious side before the end of the year.
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