To the dismay of the bulls, crypto markets continued with their whipsawing action again on Thursday, with large early gains being more than reversed over a very short time frame.

Happening over a period of a couple of hours as opposed to yesterday's couple of minutes, the size of today's reversal was nearly as large, with leading crypto bitcoin BTC$86,476.56 slumping from a session high of $89,300 to as low as $85,500. At press time BTC was changing hands at $86,000, lower by 0.8% over the past 24 hours. The Nasdaq was off session highs of about 2%, but still sharply ahead with a 1.7% advance.

The early gains came alongside a much-cooler than forecast November U.S. Consumer Price Index report, with headline inflation tumbling all the way to 2.7% from 3% previously. That data had some quickly penciling in another Federal Reserve rate cut in January, which — all things being equal — would tend to be good for risk assets, including crypto.

Skeptics, however, quickly dove into the outlier inflation numbers. "Major issue was zeroing out rent/owner's equivalent rent (OER) in October," wrote well-followed economist Omair Sharif. Unless the BLS adjusts, he continued, it will artificially lower year-over-year CPI prints until April

"This is totally inexcusable," wrote the WSJ's Nick Timiraos. "The BLS just assumed rent/OER were zero for October ... There is just no world in which this was a good idea."

At the moment, markets appear to be agreeing with the skeptics, with odds of a January rate cut not having budged from their previous slim 24% chance.

BTC rangebound, ETH hedging

Traders in the crypto options market appear to be adjusting their expectations, with bitcoin and ether ETH$2,849.09 showing diverging sentiment, according to data from Wintermute. Bitcoin options activity points to a range-bound outlook as traders continue to sell downside protection below $85,000 and cap upside exposure above $100,000.

This is "pointing to confidence in support holding and limited expectations for a sustained breakout in the near term," the market maker's OTC trading desk wrote in a note.

Ether options, by contrast, show less conviction and more hedging behavior. Support appears to be forming around the $2,700 to $2,800 range, but upside calls above $3,100 are being sold aggressively, suggesting traders are seeking protection over upside.