Authors:CryptoVizArt, Frederik Theissen, Glassnode
Compiled by:Luffy, Foresight News
Bitcoin price has been below the true market average and the cost basis of short-term holders for five consecutive months, residing in a deeply undervalued zone.
The proportion of losses realized by long-term holders relative to total on-chain realized losses has now risen to 43%, with the daily peak of loss realization reaching $280 million, the highest level since December 2022. The outflow of spot ETF funds has moderated but still maintains a state of monthly net outflows; ETF daily average trading volume remains in the range of $650 million to $950 million, shrinking approximately 80% from the peak in October 2025, indicating institutional buying demand has not yet stabilized.
Derivatives positioning has shifted to cautiously bullish, with the put/call ratio dropping to its lowest level in 2026; however, the options volatility skew still maintains a defensive premium, and the spot price remains significantly below the max pain price. The market has entered the late stage of bottoming, and the continuous narrowing of selling pressure from long-term holders is an important precondition for a market reversal and recovery.
Macro Perspective
Oil Surges, Risk Assets Under Collective Pressure
Over the past 7 trading days, WTI crude oil has cumulatively risen by 7.9%, with the majority of gains concentrated in recent sessions. News emerged that the US-Iran Memorandum of Understanding has expired, an impact that has rippled across all asset markets. Bitcoin's weekly gain peaked at 9.4% but has now retreated to a 5% weekly gain; the S&P 500 and Euro Stoxx indices have all turned negative, with European stocks leading the decline among global risk assets. Currently, Bitcoin's movement is highly synchronized with risk assets.
Liquidity Environment: Long-Short Contradictions Intensify
Amid external shocks from oil, the market's liquidity environment presents a contradictory picture. The total U.S. broad money supply (M2) has climbed to a new historical high of $22.8 trillion. Historically, broad money expansion cycles tend to boost market risk appetite; however, the Federal Reserve's balance sheet continues to shrink, with its current size down by $2 trillion from the 2023 peak. These two liquidity signals create a strong counterforce: the total broad money supply continues to rise while the quantitative tightening process persists, with real interest rates hovering near 1%, keeping the opportunity cost of holding non-yielding digital assets high. The macro-level favorable window is not completely closed but has not formed clear accommodative support either.
On-Chain Data
A Deeply Undervalued Zone Spanning Five Months
Over the past week, Bitcoin rebounded from $58,300 to $64,400, showing a short-term recovery, but the price remains significantly below the true market average of $76,600 and the short-term holder cost basis of $72,200. Only when the price reclaims these two key levels can the market exit the deeply undervalued zone; otherwise, the price action remains susceptible to declines catalyzed by external negative news.
The duration of this discount phase is noteworthy. Since early February 2026, the price has persistently traded below the cost basis of active investors and the break-even line for recent entrants, lasting nearly five months, which qualifies as a relatively long-lasting deep discount cycle in Bitcoin's history.
Continued high-volume coin distribution within a prolonged discount zone, with fresh capital consistently accumulating below the cost basis of earlier buyers and the entire market's active holdings, has historically formed the foundation for major cycle bottoms, offering long-term allocation appeal for value investors. Various metrics indicate the bottoming process has entered its later stages, but the possibility of a retest to $53,000 cannot be entirely ruled out.
Concentrated Stop-Loss Selling by Long-Term Holders with High-Cost Basis
The market is constructing a cyclical bottom. The core question now is identifying the primary source of selling pressure. The relative indicator of profit/loss realization by long/short-term holders analyzes the distribution proportion of the entire market's on-chain realized profit/loss between these two holding groups, directly reflecting the scale share of each group's profit/loss realization.
After the price fell below the true market average, the 30-day moving average share of loss realization by long-term holders has climbed from around 15% in early February 2026 to the current 43%. Loss-driven selling pressure from this group has become the most dominant bearish force suppressing the price.
These investors mostly entered near the cycle highs. After enduring months of deep drawdowns, their confidence is gradually depleted, leading to concentrated exits. This coin structure directly explains why every recovery rally faces concentrated selling from deeply entrenched positions, preventing the price from solidifying above the upper bound of the current range.
Stop-Loss Selling Pressure Yet to Show Signs of Abating
Long-term holder loss realization has become the market's primary downward pressure. The next key observation is whether this selling pressure begins to subside.
The entity-adjusted long-term holder realized loss indicator (30-day smoothed average) tracks the loss amount from sales by users holding coins for over 155 days, excluding internal address transfers, accurately reflecting genuine stop-loss exit behavior. This indicator recently hit a new daily peak, with daily loss realization volume around $280 million, the highest since December 2022, marking the second major wave of long-term holder stop-loss selling in this bear market.
The key difference is that after the first peak, selling pressure showed a temporary decline, whereas the current wave has yet to show a contraction in scale. Only when this indicator shows a clear downward trend will the market possess the foundational conditions for a shift towards a bull market. Its trajectory in the coming weeks to months will be the core signal for judging whether the market has truly completed selling pressure capitulation.
Off-Chain Markets
ETF Outflows Slow, But Outflow Trend Not Reversed
Shifting from on-chain to off-chain markets, spot ETF fund flows directly reflect institutional capital behavior. The 30-day moving average of ETF net flows indicates the daily net capital inflow/outflow from U.S. spot Bitcoin ETFs, smoothing out daily volatility to reveal underlying trends in institutional holdings.
Since mid-May 2026, this indicator entered a zone of monthly net outflows, with a daily outflow peak reaching $193 million in early June, now receded to a daily net outflow of $88.9 million. The moderation in outflow scale is a faint positive, but the market continues to see monthly capital outflows, and institutional buying demand has not stabilized. Only when the fund flow trend narrows consistently towards a balanced range can one reasonably anticipate a short-term expansionary rally.
Institutional Trading Volume Remains Sluggish
In addition to net flow data, U.S. spot ETF trading volume helps gauge the degree of institutional confidence recovery. The 30-day moving average of ETF daily trading volume currently fluctuates between $650 million and $950 million, a level comparable to Q4 2024, but also about 80% lower than the daily peak of $4.4 billion set in October 2025.
Current trading volume only represents basic institutional participation, remaining extremely low compared to bull market peaks, indicating that medium-to-long-term bullish confidence among ETF investors has not materially returned. Only when daily average trading volume shows sustained expansion *and* net outflow scale continuously narrows, with both signals appearing simultaneously, can institutional demand recovery be confirmed. Until both metrics improve in tandem, off-chain data aligns with on-chain indicators, suggesting the overall market remains in a bear market-dominated regime.
Derivatives Market
Short Covering, Positioning Shifts to Cautiously Bullish
Despite the price action reflecting weak risk sentiment, derivatives positioning structure has already shown a reverse shift. The put/call open interest ratio has dropped to 0.56, the lowest level in 2026, meaning the market currently has one put contract for every two call contracts. Options trading flow corroborates this trend: two weeks ago during Bitcoin's second retest of lows, the market frantically bought puts for hedging, causing the put/call trading ratio to surge sharply; as call buying steadily returned, this ratio quickly declined, even though the spot price has only partially recovered its losses.
Perpetual swap funding rates also support the positioning shift. The average perpetual swap funding rate has long been below the 0.01% long-short equilibrium line, far from levels seen in crowded long trades. The derivatives market has completed its short risk clearance and has turned cautiously bullish overall amid external negative shocks, a stark contrast to the crowded short positioning structure before the previous major decline.
Options Skew Still Prices in Downside Risk
While overall positioning leans bullish, the options volatility skew sends an opposite signal. The 25-delta volatility skew indicator (premium for downside protection relative to upside gain) maintains a premium across all expiration dates. Every sell-off this year has pushed this premium higher, and at the end of June it surged to 24%, marking the strongest defensive sentiment for near-month contracts since the February crash. Even with the market leaning long, traders are still willing to pay a premium to buy downside hedging instruments.
Spot Price Deviates from Max Pain Price
Beyond positioning and volatility skew, the relative position of the spot price to options market structure offers further clues. The current Bitcoin spot price is about 6% below the aggregate market max pain price of $66,000. The max pain price is the strike price at which the most open contracts expire worthless at expiration, and price action tends to gravitate towards this level before expiry.
This week's decline further widened the spread between spot and max pain, but the deviation is far from the extremes of the February crash, only residing in the middle of the 2026 price action range. Throughout the year, the max pain price has consistently acted as a gravitational center for price action, with the spot price oscillating around it, rarely deviating significantly for extended periods. If the price consistently holds above $66,000, short-term market signals would turn optimistic; if the spread widens further, it would reinforce the overall defensive trading sentiment in the options landscape.
Cost of Crash Hedging Continues to Decline
While signals from volatility skew and positioning diverge, the trend in absolute cost of hedging downside risk is clear. With the market's slight rebound, the pricing on the put side of the one-month volatility curve has shifted lower overall, with implied volatility for puts 5% below spot dropping significantly; the lowest pricing points on the volatility curve are concentrated in far out-of-the-money call options.
Overall defensive market sentiment persists, but the absolute cost traders pay to hedge against declines has noticeably decreased. Extending the time horizon makes this trend clearer: the volatility premium driven by extreme put hedging demand during the February and June crashes has gradually subsided entering July. The DVOL volatility index has fallen to a 12-month low, as the market enters a low-volatility regime. While cautious sentiment still dominates price action, hedging demand is gradually fading.
Summary
Integrating data from on-chain, off-chain, and derivatives dimensions, the market clearly exhibits late-stage bear market characteristics.
On-chain data shows a prolonged deep undervaluation cycle lasting five months continues, with long-term holder daily stop-loss realization volume rising to $280 million, indicating large-scale coin distribution is underway; however, a sustained decline in this stop-loss indicator is a necessary prerequisite for an effective market reversal.
Regarding off-chain data, ETF outflow scale has narrowed from its June peak but monthly net outflows persist; daily average trading volume is down 80% from the October 2025 peak, reflecting low institutional bullish confidence.
From a derivatives perspective, market positioning has shifted to cautiously bullish, with the put/call ratio hitting a yearly low; however, the volatility skew and options surface continue to price in downside risk.
Synthesizing all indicators, the foundational conditions required for market bottoming are all in place, but the core signals confirming a bottom have not yet appeared. Subsequent price action needs to meet three conditions: continuous cooling of long-term holder stop-loss selling pressure, stabilization of institutional fund flows, and price effectively holding above the true market average. Only on this basis will the probability of a shift into a bull market cycle significantly increase.
