Why Bitcoin's Rally Has Stalled: Whale Selling and Options Market Dynamics Explain Underperformance

Diverging Store-of-Value Assets

Bitcoin has struggled to meet bullish expectations in 2025, significantly underperforming gold as the BTC-to-gold ratio declined by 50% ^[2]. While Bitcoin reached six-figure prices and benefited from spot ETF demand, gold delivered a year-to-date gain of 63% and broke above $4,000 per ounce in Q4 ^[2].

The divergence highlights a fundamental shift in how investors approached store-of-value assets during a year marked by restrictive monetary conditions and elevated uncertainty.

Options Market Dynamics Dampen Bitcoin Momentum

Jeff Park, Partner and Chief Investment Officer at Bitcoin-Treasury company ProCap and advisor at Bitwise Asset Management, attributes Bitcoin's stagnation to structural issues in options markets ^[1]. Park identifies a critical divergence in options pricing: longer-dated call options on the Bitcoin ETF IBIT are comparatively expensive, while upside bets on native Bitcoin traded on platforms like Deribit remain significantly cheaper ^[1].

The core issue stems from covered call strategies employed by long-term Bitcoin holders. "While ETF investors are rather bullish, a portion of old Bitcoin whales are selling," Park observes ^[1]. These veteran holders sell call options against their existing Bitcoin positions without purchasing new coins, using their holdings as collateral while selling upside potential ^[1].

This practice introduces a structural volatility dampener into the market without creating additional buying pressure ^[1]. Market makers who take the other side of these trades dynamically hedge their risk, which can cause prices to become "captured" around certain strike levels, resulting in more sideways movement and fewer explosive breakouts ^[1].

Long-Term Holder Distribution Weighs on Price

Onchain data confirms significant selling pressure from long-term holders. According to Glassnode, long-term holder profit realization exceeded $1 billion per day on a seven-day average throughout much of July, marking one of the largest profit-taking phases on record ^[2].

The distribution intensified in October, when long-term holders sold approximately 300,000 BTC worth $33 billion, representing the most aggressive distribution since December 2024 ^[2]. Consequently, long-term holder supply declined from 14.8 million BTC on July 18 to approximately 14.3 million BTC at time of publication ^[2].

ETF Flows Tell a Mixed Story

Spot Bitcoin ETFs experienced strong early momentum, with total assets under management rising from $120 billion in January to a peak of $152 billion by July 2025 ^[2]. However, AUM subsequently declined steadily to around $112 billion over the following five months, reflecting net outflows during price pullbacks and a slowdown in fresh capital formation ^[2].

This contrasted sharply with gold ETFs, which saw consistent inflows. Global gold ETF holdings expanded by 397 tonnes in the first half of 2025, reaching a record high of 3,932 tonnes by November ^[2].

What Would Change the Trajectory

Park outlines two potential catalysts for Bitcoin to return to sustained bull market conditions: either systematic call selling from large holders must decrease, or demand for upside through IBIT options must rise strongly enough to overwhelm the supply ^[1].

Until then, Park concludes, "ETFs can bring buying pressure, but don't automatically trigger the next big rally" ^[1]. The uncomfortable reality is that Bitcoin requires not just demand, but also sustainably higher implied volatility, which Park considers central fuel for strong trend movements ^[1].

Elevated real yields throughout most of 2025 raised the opportunity cost of holding Bitcoin, while its correlation with equities remained relatively high ^[2]. Gold, by contrast, benefited from safe-haven and reserve-driven demand, with central bank purchases totaling 254 tonnes through October ^[2].