Bitcoin encounters an unseen “supply barrier” at $93,000, establishing a limit that current rallies cannot surpass.

On December 17, Bitcoin experienced a rapid increase of $3,000 within an hour, reaching $90,000, as $120 million in short positions were liquidated. However, it then fell to $86,000 as $200 million in long positions were also liquidated, resulting in a $140 billion market capitalization shift in just two hours.

This price movement was influenced by leverage, suggesting that leveraged positions may be out of control. Nevertheless, data from Glassnode presents a different perspective.

In a report dated December 17, the firm observed that perpetual futures open interest has decreased from its cycle peaks, funding rates remained neutral throughout the downturn, and short-term implied volatility decreased following the FOMC meeting instead of surging.

The volatility was a result of thin liquidity interacting with concentrated options positioning, rather than reckless leverage. The real limitation is structural: there is significant overhead supply between $93,000 and $120,000, coupled with December options expirations that mechanically restrict price movement within a certain range.

Overhead resistance

By mid-December, Bitcoin’s price briefly fell below the $85,000 mark, a level not seen for nearly a year, despite two significant rallies. This back-and-forth movement resulted in a dense supply from buyers who entered near the peaks, with the Short-Term Holder Cost Basis at $101,500.

Bitcoin’s cost basis distribution indicates a dense concentration of supply between $93,000 and $120,000, creating overhead resistance as current prices remain below this range.

As long as the price stays beneath this threshold, every rally encounters sellers attempting to mitigate losses, reminiscent of early 2022 when recovery efforts were hindered by overhead resistance.

The number of coins held at a loss has risen to 6.7 million BTC, the highest level this cycle, and has remained within the 6-7 million range since mid-November.

Of the 23.7% of supply that is underwater, 10.2% is owned by long-term holders and 13.5% by short-term holders, indicating that loss-bearing supply from recent buyers is transitioning into the long-term category, subjecting holders to prolonged stress that historically precedes capitulation.

Realization of losses is increasing. Supply attributed to “loss sellers” has reached approximately 360,000 BTC, and further declines, especially below the True Market Mean at $81,300, risk expanding this group.

The liquidation event on December 17 was a dramatic manifestation of an underlying constraint: there are more coins available than patient capital willing to absorb them.

Spot remains episodic

Cumulative Volume Delta indicates sporadic buy-side surges that have not developed into sustained accumulation.

Coinbase’s CVD remains relatively positive due to participation from US-based investors, while Binance and overall flows appear erratic.

Recent downturns have not prompted significant CVD expansion, suggesting that dip-buying remains tactical rather than driven by strong conviction.

Corporate treasury flows are sporadic, with occasional large inflows from a limited number of firms interspersed with minimal activity.

Recent weakness has not led to coordinated treasury accumulation, indicating that corporate buyers remain sensitive to price changes.

Treasury activity contributes to headline volatility but does not represent a reliable structural demand.

Futures have de-risked, options pin the range

Perpetual futures challenge the narrative of “leverage out of control.” Open interest has trended downward from cycle highs, indicating a reduction in positions rather than an increase in leverage, while funding rates have remained stable, fluctuating around neutral.

In December 2025, Bitcoin perpetual futures open interest decreased to approximately $28 billion from cycle highs near $50 billion, while funding rates remained stable.

The liquidation on December 17 was severe due to occurring in a thin market where modest unwinds caused significant price movements, not because aggregate leverage reached alarming levels.

Implied volatility decreased at the front end following the FOMC, while longer maturities remained stable, indicating that traders actively reduced their near-term exposure.

The 25-delta skew remained in put territory even as front-end volatility compressed, with traders maintaining downside protection rather than increasing it.

Options flow has been primarily characterized by put sales, followed by put purchases, indicating premium monetization alongside ongoing hedging. Put selling is associated with yield generation and confidence that downside risks remain limited, while put buying indicates that protection is still sought.

Traders are comfortable capitalizing on premium in a range-driven market.

The current critical constraint is the concentration of expiries. Open interest reveals that risk is heavily concentrated in two late-December expiries, with significant volume rolling off on December 19 and a larger concentration on December 26.

Large expiries compress positioning into specific dates, amplifying their impact. At present levels, this leaves dealers long gamma on both sides, incentivizing them to sell during rallies and buy during dips.

This mechanically reinforces range-bound behavior and suppresses volatility. The effect intensifies on December 26, which features the year’s largest expiry. Once that date passes and hedges roll off, the price gravity from this positioning will weaken.

Until then, the market is mechanically constrained between approximately $81,000 and $93,000, with the lower bound defined by the True Market Mean and the upper bound by overhead supply and dealer hedging.

The whipsaw on December 17 was a liquidity event within a structurally constrained market, not an indication of escalating leverage. Futures open interest is down, funding is neutral, and short-dated volatility has compressed.

What appears to be a leverage issue is actually a combination of supply distribution and options-driven gamma pinning.

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