What Will Drive Bitcoin in Early 2026: Fed Repo, ETF Outflows, Options Expiry and the Bear Case

Why early‑2026 is a macro and micro crossroad for BTC

Two things matter right now: liquidity and positioning. The Federal Reserve pushed a meaningful dose of short‑term cash into U.S. markets via repo operations — the most recent package totaled $74.6 billion — and that kind of liquidity tends to lift risk assets, including Bitcoin. At the same time, institutional behavior has shifted: spot BTC ETFs recorded record outflows over November–December, removing a direct source of buyer demand. Layer on a >$2.2B cluster of BTC and ETH options expiries at the turn of the year and recent on‑chain indicators that many readers argue mark a November bear pivot, and you have a market where flows, hedging and narrative collide.

Below I unpack each force, how they interact, and three practical scenarios for traders and macro investors.

Fed repo liquidity: mechanics and pathways to BTC

How repo injections translate to crypto

The Fed’s repo injections add short‑term cash to the banking system. That liquidity historically lowers short‑term money‑market rates and eases funding conditions for banks and funds that are more likely to allocate to risk assets. The immediate transmission channels to BTC are:

• Risk‑on reallocation: cheaper cash increases appetite for carry and speculative positions, lifting equities and, often, crypto.
• Leverage arbitrage: lower interbank rates reduce the cost of borrowed capital that traders use to lever exposures.
• Cross‑asset correlation: BTC’s correlation with tech and risk assets can re‑assert during liquidity surges, giving BTC a tailwind even if its own fundamentals are unchanged.

AmbCrypto documents the Fed’s recent $74.6B repo move and frames it as a liquidity backstop that can support a 2026 rally in risk assets when paired with accommodative market sentiment Fed repo liquidity analysis.

Limits to the liquidity story

Repo is not free money for BTC forever. It creates short‑dated liquidity that can be reversed or absorbed by other flows. If spot ETF sellers or exchange inflows dominate, that liquidity may flow into other risk markets (equities, IG credit) rather than BTC. So, while repo injections raise the probability of a risk‑asset bounce, they do not guarantee a durable Bitcoin uptrend without supportive demand on the crypto side.

Record spot‑ETF outflows: structural demand drained

CoinDesk reported $4.57 billion in spot BTC ETF outflows over November–December 2025 — a record two‑month withdrawal. That’s not trivial. Spot ETFs are a direct, on‑ramp demand source: buy orders are converted to spot BTC purchases. Sustained outflows mean the institutional buy‑back mechanism has paused or reversed, creating immediate liquidity pressure on BTC.

Key implications:

• Net selling pressure: Sellers in ETFs often force custodial spot sales or create a temporary disconnect where APs borrow BTC to meet redemptions.
• Sentiment feedback loop: Large, visible outflows can trigger stop‑loss cascades among leveraged participants.
• Rebalancing timing: ETFs can create discrete imbalances during month‑end, quarter‑end and tax windows — so watch calendar effects.

ETF outflows and Fed repo matter together because one supplies cash while the other removes direct BTC demand. That tug‑of‑war will set the pace of any bounce.

Options expiries: >$2.2B and the short‑term botanic of ranges

What a large simultaneous expiry does

When large notional amounts of BTC and ETH options expire at once (more than $2.2B by BeinCrypto’s tally), three things happen in the short term:

1. Gamma pinch and pinning risk: Market makers who sold options hedge dynamically. As expiry approaches, delta hedging can pin spot to strike levels where max pain exists.
2. Volatility compression or explosion: If positions are largely neutralized, realized vol can fall; if a large skewed bet gets blown out, vol can spike.
3. Orderbook fragility: Big expiries change who must hedge and when; that creates moments of outsized moves during settlement windows.

BeinCrypto covers the >$2.2B BTC/ETH expiry and the settlement risks into 2026 options expiry note.

Trading implications

• Expect pinning into strikes with heavy open interest. That may compress ranges for a few sessions, then release into a directional move.
• Watch implied vs realized volatility. Cheap IV makes skewed option purchases interesting; rich IV favors selling premium cautiously.
• Hedge awareness: funding rates and perpetual basis will adjust as market makers rebalance. Fundings can spike if positioning is lopsided.

On‑chain bearish signals vs technical breakout setups: reconciling the discord

Several on‑chain metrics flipped bearish in November, according to analysis summarized by NewsBTC. These include exchange inflows, weakening real‑activity signals and changes in long‑term holder behavior that could suggest capitulation or a new bear regime on‑chain bearish indicators.

At the same time, the price chart shows pockets where a breakout is plausible if liquidity and buying return: prominent moving averages, range highs, and volume profile nodes that would confirm a breakout if cleared convincingly.

So which matters more? Both — but on different time horizons:

• On‑chain indicators are often leading for structural regime shifts. Persistent exchange inflows, declining SOPR/MVRV and sustained outflows from long‑term holders suggest weaker fundamental demand.
• Technical breakouts are tactical triggers. They tell you where momentum and stop structure can accelerate moves in either direction.

Reconciling them means treating on‑chain bearish signs as a higher baseline cost for bullish bets: breakouts must have validating flows (ETF inflows, reduced exchange balances, supportive spot volume) to be sustainable. Otherwise, breakouts risk being bull traps.

Three plausible scenarios and what to watch

Scenario A — Liquidity‑led bounce (base case)

Catalysts: continued Fed liquidity, ETF outflows slow or reverse, options expiry resolves without large net sellers.

What happens: BTC re‑couples with risk assets, moves above nearby resistance, funding remains muted, and rallies are supported by inflows into ETFs and spot desks.

Trade ideas: tactical long on breakout with tight stops; calendar spreads or call spreads to target a measured move; size exposure assuming a potential retest.

Watch: ETF net flow reports, exchange reserve changes, funding rates, and AP activity around ETFs.

Scenario B — Bear continuation (risk case)

Catalysts: ETF outflows persist, on‑chain metrics worsen, options expiry triggers deleveraging and forced selling.

What happens: BTC breaks lower, liquidity dries in spot markets, and volatility spikes as market makers hedge and liquidations cascade.

Trade ideas: protective puts, shorting with risk controls, or buying deep OTM puts as skew hedges. Keep position size small due to sudden spikes in implied vol.

Watch: spike in exchange inflows, negative realized vs implied vol divergence, and sustained negative flows from institutional products.

Scenario C — Choppy consolidation with asymmetric option trades (probable alternative)

Catalysts: mixed signals — repo supports risk assets but ETF flows remain weak; options pin into strikes and vol stays rangebound.

What happens: BTC trades in a defined range; repeated attempts to break out fail, creating opportunities for premium sellers and directional option structures around key strikes.

Trade ideas: iron condors, short strangles with defined risk, or calendar spreads that benefit from time decay if you believe pinning will persist. Use stops on spot exposure because gamma events can blow these positions up fast.

Watch: open interest distribution across strikes, skew dynamics, and funding rate shifts.

Practical checklist for intermediate traders and macro investors

• Monitor weekly ETF net flows and AP behavior; large, sustained outflows matter more than headline daily prints.
• Track exchange reserves and on‑chain SOPR/MVRV for confirmation of structural demand or capitulation.
• Ahead of big options expiries (> $1B clusters), identify high open‑interest strikes — expect pinning and gamma‑driven moves.
• Watch funding rates and perpetual basis — these are fast, real‑time signs of leverage pressure.
• Use position sizing and defined‑risk options to manage the conflict between macro liquidity (Fed repo) and micro demand (ETF flows).

Bitlet.app users and other platform traders should be explicit about sizing and expiry risk when the macro and derivatives calendars align.

Final thoughts: conditionality, not certainties

Early 2026 is not predetermined. The Fed’s $74.6B repo gives Bitcoin a potentially favorable liquidity backdrop, but the record $4.57B ETF outflows and bearish on‑chain shifts from November are meaningful counterweights. Large options expiries create short‑term pinning and volatility risk that can either mute or amplify those macro forces depending on how hedging flows resolve.

For traders and macro allocators, the lesson is to trade conditional outcomes: define the scenario you’re positioning for, size accordingly, and watch the four primary telemetry bars — ETF flows, exchange reserves, options open interest/skew, and funding rates — for confirmation or invalidation.

Sources

• AmbCrypto — Fed repo liquidity and implications: https://ambcrypto.com/fed-pumps-74-6b-in-repo-liquidity-what-it-means-for-bitcoins-2026-rally/
• CoinDesk — Record spot‑ETF outflows: https://www.coindesk.com/markets/2026/01/02/bitcoin-etfs-lose-record-usd4-57-billion-in-two-months
• BeinCrypto — BTC/ETH options expiries and settlement risk: https://beincrypto.com/bitcoin-and-ethereum-options-expire-as-2026-begins/
• NewsBTC — On‑chain indicators pointing to a November bearish flip: https://www.newsbtc.com/news/bitcoin/bitcoins-bear-market-might-not-be-new-data-points-to-a-2-month-slide/