Bitcoin Price Stuck at $88K: Why Year-End Rally Falters

The Bitcoin price is currently hovering near $88,000, struggling to break through the psychological resistance at $90,000 as holiday trading conditions dampen market activity. The world's largest cryptocurrency by market capitalization is facing significant headwinds as 2023 comes to a close, putting it on track for its first annual loss in three years. Despite a strong start to the year fueled by optimism surrounding the second Trump administration, sentiment has shifted dramatically due to uncertainty surrounding tariff agendas and macroeconomic pressures.

Market participants are currently navigating a landscape defined by low volume and weak demand for spot Bitcoin exchange-traded funds. The price action remains confined to a broad range between roughly $85,000 and $95,000, a structure that has defined the market since a sharp sell-off in October. That drawdown followed Bitcoin's all-time high, and since then, the market has struggled to regain its footing, with ETF outflows adding steady pressure as the asset fails to reclaim key levels.

The Bitcoin price has been stuck in a consolidation phase, recently trading at $88,063, up approximately 1% over the past 24 hours. However, this minor gain masks a broader lack of conviction in the market. Trading volume has totaled roughly $40 billion, reflecting muted participation as December draws to a close. The asset is currently about 1% below its seven-day high of $89,201 and roughly 1% above its seven-day low of $86,855.

This thin holiday trading environment has led to distorted price action. Earlier this week, the Bitcoin price swung sharply around $90,000 during low-liquidity sessions, posting fast gains and losses that lacked follow-through. Prices briefly rose about 2.6% during these thin periods but failed to sustain levels above $90,000 during Asian hours. This lack of sustained momentum highlights the market's current vulnerability to volatility when liquidity is scarce.

According to Jasper De Maere, desk strategist at Wintermute, traders should remain cautious. In a note to Bloomberg, he stated:

"I’d continue to expect exaggerated moves on light flow through New Year’s."

He further cautioned traders against relying too heavily on short-term signals until liquidity returns to normal levels. The recent price stagnation contrasts with the broader recovery in traditional risk assets, which have largely rebounded from earlier shocks.

One of the primary factors capping the Bitcoin price is the weakening demand for spot Bitcoin exchange-traded funds. According to data, ETF outflows have reached roughly $6 billion in the fourth quarter, adding steady pressure as Bitcoin failed to reclaim the $90,000 threshold. This consistent outflow of capital from institutional products signals a decrease in bullish sentiment among traditional investors.

Furthermore, the market is still dealing with the aftermath of a wave of liquidations that occurred in October. On Oct. 10, a sharp sell-off flushed out long exposure and reset market positioning. The October downturn was compounded by leveraged positions reaching record levels, and the subsequent unwinding of these positions has created a ceiling for any upward price movement. The market is effectively cleansing itself of excess leverage, which is necessary for a healthy foundation but painful in the short term.

The combination of these factors has created a perfect storm for the bulls. While the Trump administration initially sparked optimism for crypto-friendly policies, that enthusiasm has faded as uncertainty surrounding the President's tariff agenda rattled global markets. While U.S. equities have largely rebounded, Bitcoin has struggled to regain momentum, indicating a decoupling from traditional markets.

The derivatives market is also signaling a lack of participation. QCP Capital noted in a recent note that recent moves reflect a market short on participation. The firm pointed to a steep decline in derivatives activity following last Friday’s record options expiry. Open interest dropped by nearly 50%, signaling that many traders moved to the sidelines.

This options expiry also altered short-term market dynamics. Dealers who were long gamma ahead of the event are now short gamma on the upside. In such conditions, rising prices can force hedging activity that amplifies short-term moves, particularly when liquidity is thin. A similar setup emerged earlier this month when the Bitcoin price briefly approached $90,000.

Funding rates climbed quickly as traders crowded into bullish positions, creating short-lived upward pressure. Deribit’s perpetual funding rate surged above 30% following the latest expiry, up from near-flat levels beforehand. Elevated funding rates often indicate overheated positioning and raise the cost of maintaining long exposure.

From a technical perspective, analysts suggest the market continues to reject lower levels within a broadening wedge pattern, suggesting downside momentum is weakening. Key resistance sits at $91,400 and $94,000. A weekly close above $94,000 could open a path toward $101,000 and $108,000, though resistance remains heavy. On the downside, $84,000 remains critical support; a break below that level could send the Bitcoin price toward the $72,000 to $68,000 range.