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Despite the Fed delivering their third consecutive cut to interest rates as was widely expected on Dec 10, 2025, and subsequent labor market data showing that US unemployment had ticked up to its highest level since September 2021 at 4.6%, sentiment in crypto remains at extreme lows. BTC and ETH remain 30% and 40% below their 2025 high water marks, and seem unable to sustain any meaningful recovery rally for longer than 24 hours.
As a result, participation levels in derivatives markets remain low, with subdued levels of trade volumes and a drop in volatility expectations. What positioning does remain is bearish, with a skew of volatility smiles towards puts suggesting strong demand for put options at expiries well into the new year.
Perpetuals: BTC funding rates remain positive, painting a contrast to almost all other measures of sentiment. Altcoin rates are as changeable as their daily returns.
Options: While short-tenor options do not imply the same extreme levels of volatility as they did during the height of the crash, volatility expectations remain at high levels with a steepened term structure. Put options are especially in demand at all tenors, suggesting a demand for protection against a worsening sell-off is higher than demand for exposure to any potential “Santa Rally”.
Open interest levels have moved sideways as tokens across crypto markets fail to sustain any meaningful recovery rally before returning to lower levels. BTC trades around $87K and ETH just below its psychological $3K level at $2.9K, about 30% and 40% below their 2025 highs respectively. Altcoins have fared worse, despite the launch of the first altcoin Spot ETF products in the US.
As a result, we see low levels of participation and position-taking across derivatives markets, a matter likely exacerbated by the arrival of the Christmas period without any signs of the “Santa Rally” that many may have hoped for.
Funding rates continue to paint a different picture to other measures of sentiment, such as options markets activity and ETF inflows. BTC’s funding rate has been charged to short positions in only two 8-hour windows since Nov 29, 2025. Since that date, BTC spot price has moved mostly sideways with each recovery rally matched by a subsequent sell-off in each case. Altcoin funding rates, however, have been far more changeable and reflect the extra volatility that they have experienced over the last two weeks.
This information, coupled with almost no change in the levels of open interest in perpetual swaps, indicates a far lower level of position-taking and participation than we have seen for most of 2025 across all tokens.
Volatility smile skews for all tokens have held a consistent skew towards OTM puts that is present across all tenors, as both BTC and ETH markets are pricing puts at more than a 6 point volatility point premium. This is in contrast to the funding rates of their perpetual swap tokens, which do not show signs of clear directional sentiment.
The bearishness in options markets, coupled with signs of low positioning in other derivatives metrics, is likely a reflection of traders expecting spot prices’ slow, sideways slog to continue in the near future, rather than pricing-in a specific upcoming event risk.