Federal Reserve policy shift boosts confidence! Bitcoin stabilizes at 88,000, and the options market shows a "selling pressure recession" signal

Good news came during Tuesday’s Asian trading session—Bitcoin successfully held steady near $88,000, driven by rising expectations of a Fed rate cut in December. At the same time, Ethereum also rebounded, trading around $2,945, with market sentiment shifting from extreme pessimism to cautious optimism.

According to the latest data from on-chain analytics platforms, Bitcoin has rebounded from last week’s low of $82,000 and is now stabilizing in the $88,000 range, reflecting strengthening market expectations of a Fed rate cut. This shift is most visibly reflected in the options market—where the previously active demand for put protection has significantly cooled down.

How Rate Cut Expectations Are Driving This Rally

Polymarket’s betting data says it all. Over the weekend, the market’s probability of a rate cut in December shifted noticeably, helping the crypto market regain footing after Bitcoin once dipped to $82,000 amid volatile swings. Traders reassessed expectations of easing policies, and their positions adjusted accordingly.

Even more interesting are the changes in the options market. When Bitcoin retested $80,000, investors heavily bought put options as downside protection. But now, the situation has changed—this pessimism has been alleviated. The key indicator, the 25-Delta Skew, shows this clearly: it rebounded sharply from -10.96 to -4.58. In simple terms, rising Skew indicates that investors’ fears of downside are easing.

On-Chain Data Reveals “Deleveraging” Phase

Glassnode’s latest report indicates that the current market is in a structural “reset” phase. Although oversold signals still exist, the very critical point is—the selling pressure from bears is waning. On-chain metrics show that the supply held by short-term holders is increasing (which often occurs at the end of a correction), and the cumulative trading volume difference in perpetual contracts remains negative, suggesting recent selling pressure mainly comes from aggressive futures trading.

However, Glassnode analysts believe this is more like a “controlled deleveraging” rather than chaotic forced liquidations. Holdings are stabilizing, and while spot trading activity remains subdued, the continued outflow from ETFs hints that the market is shifting from “aggressive selling” to a “gradual risk adjustment phase.”

Funding rates on major perpetual platforms have turned negative—an important signal indicating that long leverage has been squeezed out, making it harder for the market to trigger a chain of liquidations again.

What Do New Trends in the Options Market Indicate?

Interestingly, even as Bitcoin is still recovering, institutional investors are already positioning for future gains. Laevitas data shows that in the past 24 hours, trading volumes for call options at strike prices of $100,000, $112,000, $116,000, and $118,000 have increased significantly.

More notably, many investors are engaging in bullish butterfly spreads—an options strategy suitable for those expecting the price to fluctuate within a certain range. The prevalence of such trades suggests the market is preparing for a rally later in 2025.

The Next Major Challenge

Ryan Yoon, Senior Analyst at Seoul Tiger Research, offers a key insight: “For Bitcoin to move higher, it must regain the $87,000 to $88,000 zone. If it falls below this level, the current rebound is just a relief rally, with limited upside, as many investors remain deeply trapped.”

Bitwise Chief Investment Officer Matt Hougan shared a more optimistic outlook on Monday. After speaking with a $50 billion asset management firm, he posted on social media: “Institutional investors are still patiently bullish, and confidence continues to grow.”

The Fed Decision as a Critical Turning Point

The market is currently in a delicate balance. Upcoming US macroeconomic data and the December Fed rate decision will be decisive factors in Bitcoin’s next move.

If the market continues to bet on a December rate cut, BTC is likely to stay within the current range, with positions gradually normalizing, deleveraging effects diminishing, and volatility easing. Conversely, any unexpectedly strong economic data or hawkish Fed signals could shake market confidence again.

Bitcoin now resembles walking a tightrope—supported by rate cut expectations on one side, and the risk of waning but not fully gone selling pressure on the other. The market is waiting for the Fed’s final decision.