BTC steadies after drop, yet downside risks remain

BTC held at $87,541.80, with a recent hike above $88,000. Trading data is showing that the dip to $80,000 may not yet count as a local bottom. 

The recent crash of BTC to $80,000 and subsequent recovery to $88,000 renewed the discussion on the exact market bottom. Trader behaviors and their current position suggest the market remains fearful, and may take a while to recover. For now, there is no consensus that the bottom is in, and new drawdowns are still seen as highly probable. 

BTC still trades at ‘extreme fear’ based on the Fear and greed index, which fell to 15 points from a recent level of 19 points. The index shows the behavior of derivative traders, who are still reluctant to rebuild positions. 

Is the BTC bottom already in the past? 

Based on Santiment research, social media data reveals that the recovery to $88,000 led to expectations that the worst downturn is still in the past. However, Santiment warned that traders were prone to confirmation bias. The recent recovery in optimism on social media may be short-lived, as trader behaviors still show caution. 

At the same time, Santiment noted a long-term slide in bullish messaging on social media, with fewer bullish calls for BTC since July 2025. 

The worsening sentiment and market conditions suggest that in hindsight, BTC is already in a bear market, and may see worse dips to a lower range, amid short-term recoveries. On-chain data shows lowered activity, more holders with unrealized losses, and selling from larger wallets into retail wallets. Santiment noted whales usually drove rallies, and for now, the market is more subdued, with fewer notable whale transfers or trades.

BTC open interest weakens further

BTC open interest signaled an increasing caution from investors. Open interest stood at a six-month low, returning to levels not seen since April. 

BTC open interest moved down to $29B, as traders rebuilt much smaller positions after the latest liquidations. Funding rates once again dipped to negative in the past week, signaling bearish expectations. 

Santiment also noted that sustained negative messaging and bearish signals can also translate into a rapid shift in BTC direction. In the past, BTC has outperformed just as crowd sentiment was at its lowers, or crashed when retail traders expected a rally. 

After the recent shift in positions, BTC liquidity set up a range between $85,000 and $88,000. Short positions increased their range, with liquidity available above $91,000. The current derivative market set up expectations for a recovery to the $90,000 range, though trading remains uncertain. 

BTC volatility increased to 1.97%, the highest level for the past six months, following the recent unpredictable price shifts. 

The recent price action is already suppressing the expectations of a year-end rally. BTC is also decreasing its potential for a risk-on asset, as attention shifted to Nasdaq and NVIDIA as the new promising risk-on assets.

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