Bitcoin hovers around 87,600, and the optimism about AI cannot hide the underlying concern of persistently high implied volatility.

On Wednesday in Asia, Bitcoin fluctuated around $87,600, up approximately 2.5% from the weekend low of $85,550, but the rally was clearly weak. Superficially, Amazon’s $50 billion AI infrastructure investment pledge on Monday boosted market optimism, but this enthusiasm is rapidly fading. Nvidia’s 6% drop on Tuesday directly exposed the fragility of the “AI-driven crypto” narrative.

Can the AI wave sustain Bitcoin’s upward momentum?

Market expectations for 2025 are subtly shifting. Cryptocurrencies are no longer seen as traditional inflation hedges but have become “highly volatile AI proxy assets.” Market maker Enflux bluntly states: when tech stocks falter, the entire crypto market loses its most critical macro growth driver.

More importantly, capital flows have reshuffled. Despite declining market risk sentiment, Bitcoin has not attracted safe-haven buying as expected; instead, large amounts of capital are flowing into assets like Solana, Ethereum, and DePIN, which have clearer catalysts. Bitcoin’s dominance has not surged as it did during past crises, and liquidity is dispersing at an accelerated pace.

What are options traders hinting at? The truth behind high implied volatility

A large bullish butterfly spread trade (notional value around 20,000 BTC) on Deribit sends a complex signal: traders expect Bitcoin to settle between $100,000 and $118,000 at December 2025 expiry. This is not bullish euphoria but rather a warning—don’t expect a rapid surge by year-end.

Wintermute OTC trader Jake Ostrovskis bluntly states: the market’s consensus “Santa rally” priced in for year-end has been completely erased. More concerning is that 30-day and 180-day implied volatilities are still rising. Sean Dawson, head of research at Deribit, notes that traders are willing to pay for “panic protection,” indicating the market is far from bottoming.

What does rising implied volatility mean? The market anticipates increased future volatility, and the current volatility term structure is in an “inverse market” state—short-term IV exceeds long-term IV. This is a typical sign of market stress. Only when the structure reverts to a “positive” (long-term IV higher) can we say risk is truly being released.

Market sentiment shifts, but bottoming conditions are not met

Adam Chu, head of research at GreeksLive, told Decrypt that the expectation of new highs in Q4 has completely dissipated, and market sentiment is turning bearish. But this does not mean the rebound is over—only that expectations have shifted from “mania” to “caution.”

Last week’s report from Glassnode pointed out that selling pressure momentum is indeed decreasing, although the market remains oversold. Meanwhile, holdings are stabilizing, spot trading is subdued, and Ethereum ETF net outflows continue. These signals suggest the market may be slowly transitioning from panic to a more neutral stance. Ethereum is currently trading above the $29,400 median, showing relative resilience compared to Bitcoin.

Implied volatility remains non-neutral, downside risks persist

Dawson emphasizes that the market has not yet met the conditions for a “true bottom.” Since the flash crash on October 10, options skew has been deeply negative. Although it has slightly recovered over the past week, there is still a long way to go before skew truly reverts to neutral. This indicates that bearish sentiment has not fully dissipated.

Professional traders are preparing for continued volatility and non-linear rebounds. Chu adds that year-end remains risky, with implied volatility expectations still high. Dawson predicts Bitcoin will stay within the $100,000 to $118,000 range for the rest of 2025, with a breakout above $120,000 more likely to occur after 2026.

In other words, the current upward space is firmly capped, and the high implied volatility environment is unlikely to improve quickly—this is the most direct evidence that market panic has not truly bottomed out.