Bitcoin (BTC) Price: How Asset Manager Rebalancing Could Fuel a January Rally

Get ready for the January effect. A wave of institutional capital is poised to hit the crypto markets as major asset managers rebalance their portfolios for the new year. Bitcoin, the flagship digital asset, stands directly in the crosshairs of this predictable, yet powerful, financial flow.

The Rebalancing Engine

It's not speculation; it's spreadsheet math. Large-scale portfolio managers operate on strict allocation mandates. When traditional assets like equities outperform over a quarter or year, their weighting balloons beyond target thresholds. The corrective action is mechanical: trim the winners, buy the underperformers to get back to policy.

Enter Bitcoin. If it's held in these portfolios and has underperformed relative to other assets heading into year-end, it automatically becomes a buy order come January. This isn't about belief in blockchain; it's about adhering to an investment policy document. The sheer size of the capital involved can create a self-fulfilling price surge, a phenomenon Wall Street understands all too well but rarely talks about outside of boardrooms.

A Tailwind, Not a Guarantee

While the rebalancing thesis provides a compelling technical catalyst, it doesn't operate in a vacuum. Macro sentiment, regulatory whispers, and broader risk appetite will ultimately dictate if the rally gains momentum or fizzles. It adds a quantifiable layer of buying pressure to the market's existing narrative.

The cynical take? The same firms that might pour millions into BTC for rebalancing purposes are likely the ones that spent the previous quarter publishing cautious research notes on crypto volatility. Finance's left hand often fuels what its right hand warns against. Watch the flows, not the headlines.

TLDR

• Bitcoin traded around $87,500 on Tuesday, up 2% over 24 hours after Monday’s decline
• Bitcoin underperformed the S&P 500 by 26% in Q4 2025, marking its worst quarterly performance relative to stocks
• K33 analyst Vetle Lunde suggests this underperformance could lead to rebalancing-driven buying in January 2025
• Historical pattern shows bitcoin often rebounds after quarters where it underperforms equities, as seen in Q1 2025
• Trading volumes and derivatives activity remain near yearly lows, showing traders are hesitant to take new positions

Bitcoin held steady around $87,500 during U.S. afternoon trading on Tuesday. The cryptocurrency gained 2% over the previous 24 hours.

Other major cryptocurrencies followed similar patterns. Ether, XRP and solana all posted comparable gains during the same period.

Crypto-related stocks also recovered from Monday’s losses. Strategy climbed 3% while Coinbase advanced 1%.

The recovery comes after a challenging period for bitcoin. Josh Barkhoarder, head of sales at FalconX, said clients are positioned with cautious optimism. Most expect crypto to remain range-bound until a clear catalyst emerges.

Traders are holding core Bitcoin exposure while keeping cash on the sidelines. They are waiting for market direction before making larger moves.

Rebalancing Could Drive January Gains

Vetle Lunde, head of research at K33, identified a potential catalyst for bitcoin’s next move. As year-end approaches, asset managers typically rebalance portfolios to maintain their mandated allocations.

Bitcoin’s performance relative to stocks this quarter creates an unusual situation. The cryptocurrency has underperformed the S&P 500 by 26% during Q4 2025.

This pattern has appeared before with predictable results. In Q1 2025, bitcoin underperformed the S&P 500. The cryptocurrency then started Q2 with gains.

The opposite occurred in Q2 2025. Bitcoin outperformed equities during that quarter. It then posted declines at the beginning of Q3.

Lunde explained that fund managers with predetermined bitcoin allocation targets may adjust their portfolios before year-end. This could result in excess inflows during the final trading days of 2025 and into early January 2026.

The size of the underperformance suggests a large rebalancing may be coming. Asset managers need to buy bitcoin to bring their portfolios back to target allocations.

Market Activity Shows Caution

Market data indicates traders remain hesitant despite price stabilization. Derivatives activity on the Chicago Mercantile Exchange sits NEAR yearly lows.

Bitcoin futures open interest hovers around 124,000 BTC on the CME. This level represents one of the lowest points of 2025.

Perpetual swap markets show similar caution. Funding rates remain near neutral levels. Open interest shows little movement in either direction.

These metrics signal a lack of directional conviction among traders. They are not taking strong positions betting on price moves up or down.

Spot trading volumes also declined recently. Volume dropped 12% through last week according to K33 data.

The falling volumes confirm that many traders remain reluctant to engage. With the year drawing to a close, market participants appear content to wait.

Bitcoin’s Q4 underperformance against stocks now stands at 26%, setting up potential portfolio rebalancing flows in January 2026.