The silent market is frightening.
BTC weekly trading volume has fallen to its lowest level since 2023. Deribit's BTC volatility index DVOL also bottomed out last week.
Liquidity is also insufficient. At 20:30 last night, when the CPI data was released, BTC quickly fell from $64,450 to $64,100 in an instant, then rebounded to around $64,300 before falling again.
An hour later, when the US stock market opened, BTC had few participants. Apart from the short-lived capital flows brought by cross-market arbitrage, the market has not formed a new direction. The current BTC price is easily pushed around, but there are not enough traders willing to continue the trend.
What the market lacks is not just a piece of good or bad news.
It lacks participants.
Options Market
Let's look at the options data.
BTC 25 Delta Skew measures the implied volatility difference between put and call options with similar deltas. In the chart, the one-month, three-month, and six-month curves are all in positive territory, with the one-month at about 12%, the three-month at about 10.7%, and the six-month at about 9.1%. The shorter the tenor, the higher the skew. Traders' demand for short-term downside protection is clearly higher than their pricing of long-term risk.
The aggregate Gamma heatmap through the end of the month gives more specific price boundaries. Currently, the market is still in the long gamma volatility suppression zone. Market makers buy when prices fall and sell when they rise, and their hedging behavior pulls prices back into the range. The gamma reversal zone is near $61,000 to $60,000. As long as BTC stays above the boundary, market makers' hedging absorbs volatility; if the price falls below the boundary, positions shift to short gamma, and market makers need to continue selling during declines, turning their hedging behavior from a shock absorber into an accelerator.
If You Don't Buy, Who Do We Sell To?
Many traders are using two changes to support a bullish view. Saylor has sold hundreds of millions of dollars worth of BTC in batches over the past month, accounting for about 0.13% of Strategy's holdings, and the BTC price has remained roughly flat. On the other hand, STRC has rebounded from a low near $73 to $95.45, just one step away from $100. Saylor selling coins without crashing BTC, and STRC recovering most of its losses, naturally leads the market to interpret that the bad news has been digested.
The problem is that, combined with the current low-liquidity, low-volatility market conditions, another explanation for the above phenomena can be given.
Large entities still have spot positions to exit, but the current trading volume cannot absorb large sell orders. They have temporarily stopped selling simply because the order book is too thin. When STRC returns to $100 and brings buying pressure back to BTC, it may give these entities what could be their last exit opportunity.
Positive news will improve selling conditions.
This path can explain why BTC remained range-bound during Saylor's small-scale selling, and also why there is still downward pressure after Saylor resumes buying. The variable that determines the price is how large Strategy's orders are relative to the potential selling pressure in the entire market. Looking only at Saylor's buying or selling does not give a complete answer.
A reasonable counterargument is that large entities have previously encountered volatility events and Strategy buying, so why haven't they completed their exits? Historical trends do not provide an optimistic answer. After the last time STRC resumed capital flows and Strategy provided spot support, BTC subsequently experienced a rapid decline, closing near $59,000, followed by a long period of consolidation.
And options positions have set $61,000 to $60,000 as the volatility amplification zone. Once large spot sell orders push the price into the negative gamma zone, the next bottom may form.
STRC's Dilemma
Strategy recently increased its dollar reserves by $650 million and repurchased $109 million of STRC. The company disclosed that these actions extended the dollar reserve coverage period by 143 days to 2.7 years and narrowed STRC's bitcoin credit spread by 10 basis points. Including the previous week's operations, the two-week repurchase total is approximately $190 million.
This money brought STRC back to $95, but it did not solve the most critical problem.
STRC must return to $100.
Strategy will issue additional STRC at market price via ATM near $100. This is equivalent to telling the market that as long as the stock price approaches $100, the company will offer more new shares. Consequently, all holders who bought below $100 will sell around $99.9, and even if STRC reaches $100, it will immediately be sold back below $100 by these holders; short sellers can also sell borrowed shares near $99.9 and buy them back when the price falls again to $95, earning a spread of about $5.
The biggest risk in this trade is that STRC breaks above $100 and continues to rise, forcing short sellers to cover at higher prices. However, Strategy itself increasing supply near $100 is equivalent to actively suppressing this upside. The more the market believes the company will issue shares at $100, the more traders are willing to sell early at $99.9, and the harder it is for STRC to truly stand above $100.
As long as this rule remains unchanged, if the approximately $190 million buyback still cannot help STRC reclaim $100, the market will continue to ask where the next funds to purchase STRC will come from, and concerns about BTC liquidation will also rise. Strategy's simultaneous replenishment of dollar reserves and buyback of STRC indicates that the company currently prioritizes repairing the financing side, with resuming net BTC purchases taking a back seat.
Shorting is not a free trade either. Short sellers need to borrow STRC first and then sell it to the market. During the holding period, they must pay an annualized securities lending rate exceeding 50% and also compensate for a dividend of about 12%, totaling an annualized cost of over 60%. If the stock price stays near $100 for a long time, the longer it stays, the more these fees eat into profits.
Because STRC will issue additional shares to dilute upside, short sellers rarely face sustained price increases. If Strategy stops issuing STRC at $100 and STRC rises from $99.9 to $102-105, short sellers will immediately incur paper losses of $2.1 to $5.1 per share. Some short sellers may have to buy back STRC to stop losses, and their buy orders will continue to push the price higher, forming a short squeeze.
The securities lending fee determines how long short sellers can hold, and Strategy's issuance rules determine whether they need to stop losses early. As long as STRC issuance begins at $100, it will attract short sellers.
The contradiction in capital allocation has not disappeared either. When MSTR's mNAV is below 1, continuing to sell common stock dilutes the per-share value of common shareholders; buying back STRC without increasing dividends or buying back MSTR gives preferred shareholders more direct protection. The company sees a longer dollar reserve coverage period and a narrower bitcoin credit spread, while common shareholders calculate who bears the cost of this repair.
Bitfinex Long
Bitfinex Long typically moves inversely to BTC price. When BTC falls, large long positions on Bitfinex tend to increase; when BTC rises, these long positions gradually decrease. The market habitually treats this inverse relationship as a position indicator to observe whether large funds are absorbing BTC during price weakness.
Bitfinex Long's rate of change (inverted) indicator
Recently, this indicator has failed. The rate of change of Bitfinex Long has dropped to its lowest level since the end of the 2022 bear market. BTC is trading sideways in the sixty-thousand-dollar range, and Bitfinex's long positions have neither increased significantly nor exited significantly, failing to provide direction for the next move.
BTC's "savior" has turned into "Satan."
