Bitcoin’s Hidden Supply Wall: Understanding the $93,000 Ceiling
Bitcoin’s recent price volatility has left many investors wondering what’s driving the market’s wild swings. On December 17, the cryptocurrency’s price rose $3,000 in just an hour, reclaiming $90,000, only to plummet to $86,000 as $200 million worth of long positions were liquidated. This $140 billion market capitalization surge in two hours was driven by leverage, but a closer look at the data reveals a more nuanced story.
According to Glassnode’s report, open interest in perpetual futures declined from cycle highs, funding rates remained neutral during the decline, and short-term implied volatility decreased rather than increased following the FOMC meeting. The trigger for the price movement was not reckless leverage, but rather low liquidity colliding with concentrated options positioning. The real constraint is structural: an overhead bid between $93,000 and $120,000, combined with December option expirations that automatically lock the price in a range.
Overhead Resistance: The $93,000 Ceiling
Bitcoin’s price briefly fell below $85,000 in mid-December, a level last reached almost a year earlier, despite two major rallies. This back-and-forth saw a heavy supply of buyers entering near the highs, with the cost basis for short-term holders at $101,500. The cost basis distribution shows a dense supply concentration between $93,000 and $120,000, creating overhead resistance as current prices are below this group.
As long as the price remains below this threshold, any rally will encounter sellers looking to cut losses, similar to early 2022 when recovery attempts were limited by overhead resistance. Coins held at a loss rose to 6.7 million BTC, the highest level this cycle, and have been in the 6-7 million range since mid-November. Of the 23.7% of supply underwater, 10.2% is held by long-term holders and 13.5% by short-term holders, meaning the losing supply is maturing from recent buyers to the long-term cohort, exposing holders to ongoing stress that has historically preceded capitulation.
Spot Market Remains Episodic
The cumulative volume delta shows periodic breakouts on the buy side that failed to develop into sustained accumulation. Coinbase CVD remains relatively constructive due to US participation, while Binance and overall flows remain choppy. The recent declines have not triggered a decisive CVD expansion, meaning dip buying remains tactical rather than conviction-driven. Corporate financial flows remain sporadic, with sporadic large inflows from a small subset of companies punctuated by minimal activity.
Treasury activity contributes to overall volatility but does not represent reliable structural demand. The risk in futures has fallen, and options determine the range. Perpetual futures contradict the “levers out of control” narrative, with open interest trending lower from cycle highs, suggesting position unwinding rather than new leverage, while funding rates remained capped and hovered around neutral.
Options-Driven Gamma Pinning
Implied volatility initially decreased after the FOMC meeting, while longer maturities remained stable, suggesting that traders were actively reducing their short-term exposure. The 25-delta skew remained in put territory even as front-end volume shrank, and traders are maintaining downside protection rather than increasing it. Options flow was dominated by put sales followed by put purchases, suggesting premium monetization alongside continued hedging.
The crucial limitation is now the effluent concentration. Open interest shows that risk is heavily concentrated on two expirations in late December, with significant volume increasing on December 19th and becoming more concentrated on December 26th. Large expiration periods compress the positioning on specific dates and thus increase their influence. At current levels, this leaves traders with a long gamma on both sides, encouraging them to sell on rallies and buy on dips.
This mechanically reinforces range-bound action and suppresses volatility. The effect intensifies on December 26th, the largest expiration of the year. Once this is over and the hedges are removed, the pricing power of this positioning will weaken. Until then, the market will be mechanically constrained between approximately $81,000 and $93,000, with the floor defined by the true market mean and the ceiling defined by overhead supply and dealer hedging.
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