MarketsBitcoin
|6 min ReadBitcoin Drops Below Key Cost Basis As Market Turns Defensive
Carter Hayes
Senior Analyst
Published
Jan 16, 2026
Bitcoin has slipped under major cost-basis bands for the first time this cycle, sending a clear signal. Spot demand is fading. ETF flows are negative. Open interest is draining out of futures. Funding is at cycle lows. Options markets are rotating hard into protection with rising volatility and heavy put demand. The entire structure looks cautious, defensive, and unwilling to take risk.
Short-Term Holders Under Stress As Price Breaks Lower
Bitcoin’s slide below 97,000 dollars confirmed the break of last week’s consolidation band. The fall extended toward 89,000 dollars, pushing price well under the short-term holder cost basis near 109,500 dollars and below the minus-1 standard deviation band at roughly 95,400 dollars.
This structure means almost every recent buyer is sitting in unrealized losses. Historically, that is when panic selling accelerates and momentum weakens until new demand steps in. For now, the 95,000 to 97,000 range flips into resistance. Reclaiming it would be an early signal that the market is attempting to stabilize.
Panic selling has already shown up. Short-term holder realized losses have surged to 523 million dollars per day on a seven-day basis. That is the highest since the FTX collapse and reflects the heavy top formation built at 106,000 to 118,000 dollars. Either stronger demand absorbs this pressure or a longer accumulation phase becomes necessary.
Testing New Structural Zones
The next meaningful support sits at the Active Investor Realized Price near 88,600 dollars. Price is now testing the cost basis of non-dormant holders who have been actively moving coins. Losing this level would mark the first break below active cost basis this cycle and would signal that bearish momentum is dominating.
Despite this break of major short-term cost models, the magnitude of unrealized losses remains mild compared to 2022–2023. Approximately 6.3 million BTC sit in loss, mostly in the minus-10 to minus-23.6 percent range. That profile resembles early 2022’s shallow bearish structure rather than deep capitulation. This is why the 88,600 to 82,000 band may become the decisive zone separating a mild drawdown from a full bear-market structure.
ETF Flows Show A Clear Absence Of Demand
United States spot Bitcoin ETF flows remain deeply negative on a seven-day basis. Institutional allocators are withdrawing rather than adding. This stands in sharp contrast to the inflow regimes that drove earlier rallies.
With TradFi demand absent, a major pillar of support is missing. Until ETF flows turn positive, spot buying pressure will struggle to rebuild momentum.
Derivatives Confirm A Full Risk-Off Shift
Futures open interest continues to fall, matching the price decline and signaling that traders prefer unwinding exposure rather than buying dips. This is not speculative enthusiasm. It is defensive de-risking.
Funding rates across the top 500 assets have dropped to cycle lows. Positive premia have evaporated. Leveraged long interest has cooled almost completely.
Together, falling open interest and negative funding show a market draining leverage and stepping away from risk.
Options Market Reprices Downside Risk
The options market reacted immediately to Bitcoin’s brief dip under 90,000. Implied volatility rose across maturities, with the sharpest repricing in short-dated options. This reflects both traders buying protection and short-gamma desks adjusting hedges.
Implied volatility is now back near levels seen during the October 10 liquidation event.
Skew remains firmly negative across maturities. One-week skew sits around minus-14 percent, showing strong demand for downside puts. Longer maturities are also negative but less extreme, suggesting most fear is concentrated in the near term.
Put Buying Surges As Traders Rotate Into Protection
Taker flow confirms a clear shift. Put buying far outweighs call demand. Traders are not positioning for upside. They are hedging aggressively into weakness. Calls remain muted. Protection is the priority.
The 90,000-dollar strike shows the strongest pivot. As Bitcoin broke below 93,000, traders lifted premiums on 90K puts sharply. This concentrated demand pushed short-term implied volatility higher and reinforced the market’s defensive posture.
DVOL Signals A Market Expecting Bigger Moves
DVOL, which tracks implied volatility across a constant-maturity basket, has moved from roughly 40 to near 50 over the past three weeks. This aligns with everything seen in the options market. Rising implied volatility, negative skew, short-delta flows, and heavy put demand all point toward an expectation of larger moves ahead.
A Market Searching For Stability
Bitcoin is working through a fragile phase defined by weakening structure and reduced demand:
Spot buyers are absent.
ETF flows are negative.
Futures traders are unwinding leverage.
Options markets are hedging aggressively.
Implied volatility, skew, and put flows all show the same message: the market expects turbulence. Whether this turns into a deeper correction or stabilizes near the active cost basis depends on whether demand re-emerges in the 88,000 to 82,000 zone.
For now, the posture across all markets is clear.
Investors prefer protection over exposure, and the system is braced for volatility.
Disclaimer: This document is intended for informational and entertainment purposes only. The views expressed in this document are not, and should not be taken as, investment advice or recommendations. Recipients should do their own due diligence, taking into account their specific financial circumstances, investment objectives and risk tolerance, which are not considered here, before investing. This document is not an offer, or the solicitation of an offer, to buy or sell any of the assets mentioned.