A quick risk-on burst followed cooler-than-expected inflation and falling short-dated Treasury yields, as traders leaned toward the Fed skipping a hike next month. Equities popped early but ended the session lower. Bitcoin joined the initial bounce, reaching $85,594 before giving it back and settling near flat on Wednesday.
The turbulence comes as Bitcoin logs its strongest quarter since late 2024, when President Donald Trump won re-election, notching a 43% rise in Q3. Whether it pushes to another yearly high or pulls back is still an open question, with many traders sitting tight in derivatives after several heavy liquidation waves in recent months.
Recent fast swings have largely stemmed from leverage getting wiped out in perpetual futures, the biggest venue for crypto trading. In late August, a record clearing of bearish positions set off an unexpected rally as shorts scrambled to repurchase coins and cover.
In a Wednesday note, Tagus Capital wrote that most of the speculative leverage accumulated as prices surged toward $87,000 has been unwound, leaving perpetuals positioning close to neutral while the market consolidates. Following another wave of perp liquidations earlier this month, Bitcoin open interest is at its lowest since March and roughly 20% below August levels, with the token still about 35% above its August low of $62,000.
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Deribit data point to a constructive near-term setup, while traders are adding more downside cover around $70,000 toward year end. Calls expiring Oct. 30 with $95,000 and $90,000 strikes carry the most open interest by a wide margin. On the downside, puts with $75,000 and $60,000 strikes are among the most sought-after for late November and December, respectively.
"The Bitcoin derivatives market has reset in a rare, orderly fashion," said Vetle Lunde, who leads research at K33. "Past orderly unwinds offer few directional signals, but they have tended to precede low forward volatility as traders sit on the fence." And as Bitget Wallet's research lead Lacie Zhang put it, "October has a strong historical track record for Bitcoin, but seasonality alone is not an investment thesis."
If the recent action felt whippy, that is because much of it tracked leverage unwinds rather than fresh positioning. With perps reset toward neutral and open interest compressed, price swings can still be sharp, but the options board suggests traders are leaning mildly bullish near term while building cushions into year end. Translation for everyday investors: rallies and dips driven by short squeezes and liquidations can flip quickly, so watch how positioning shifts, not just the price.
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