Original Author: Glassnode
Original Compilation: AididiaoJP
Bitcoin's bottom is still forming, but its characteristics are quietly shifting. The capitulation selling by long-term holders is beginning to cool, buy-side demand successfully absorbed the June lows, and the price is gradually recovering, challenging the resistance zone that previously suppressed it.
Executive Summary
- The market has begun testing overhead resistance.
- Bitcoin reacted much more strongly to weak inflation data than any major stock index, the most positive response to good news in weeks.
- Correlation with equities is loosening, while the inverse link with the dollar deepens – liquidity, not risk appetite, is the current driver.
- Long-term holder selling – the primary source of sell pressure this year – has receded from its peak.
- Profit-taking has drastically decreased, and buy-side demand fully absorbed the selling at the June lows, reducing the supply pressure faced during each rally.
- The Short-Term Holder Cost Basis, near $69,000, is the breakeven line for recent buyers and will be the next major resistance; a strong reaction is expected there.
- Derivatives traders are unwinding bearish positions, but spot buying hasn't followed yet – this is the missing link in the current recovery.
Macro Insights
The nature of pressure on Bitcoin this quarter is a story of real rates, not risk aversion. The 10-year real yield has risen near its 2026 highs around 2.4%, and the dollar has stayed above its 200-day moving average since May. However, broader risk assets show no stress: equities are near highs, credit spreads are low, and volatility remains subdued.
Bitcoin Leads the Rally
Following Tuesday's release of mild inflation data, Bitcoin's gains outpaced any other major asset. It jumped immediately after the data and outperformed US and European stocks significantly for the week. After a month of sideways action at low levels, the market has started reacting positively to good news again.
This sensitivity is a signal in itself: a market eager to rally on a single inflation report often indicates sellers are exhausted, and buyers are just waiting for a reason.
Shift in Macro Drivers
Beneath the rally, Bitcoin's drivers are changing. Its correlation with US stocks has been declining since winter, while its inverse relationship with the dollar has been deepening. Bitcoin is acting less like a proxy for equities and more like an asset that strengthens as the dollar weakens.
It hasn't detached from the risk asset universe, but the dollar and liquidity channel now exert more influence than equity sentiment. If the macro environment eases from here, this channel is most likely to transmit it first.
On-Chain Insights
Between Floor and Ceiling
The cost basis map precisely describes the current position. Bitcoin price is above the network-wide Realized Price – the natural floor support in bear markets – yet below the Short-Term Holder Cost Basis (near $69,000) – the average entry price for buyers over the past five months. The current recovery is climbing towards this breakeven resistance level, above which a large number of trapped buyers await an exit.
The first touch of this level will likely trigger a strong reaction, as the group most inclined to sell are those about to break even. Successfully reclaiming it will open space for recovery; rejection will reinforce the range-bound structure.
Sellers Stop Taking Profits
The Long-Term / Short-Term Holder Realized Profit/Loss Relative metric categorizes all on-chain selling into four types: veterans and newcomers, each selling in profit or loss. For most of this cycle, profit-taking sales by Long-Term Holders dominated sell pressure. Now, that flow has almost completely dried up; veterans are selling mostly at a loss.
Loss sales by both groups constitute the primary on-chain volume signature, a classic late-bear-market signal. The key change is that the proportion of Long-Term Holder sales has stopped growing. The wave of selling pressure that met every rally this year is no longer expanding.
Capitulation Selling Begins to Cool
This capitulation rhythm is the most important indicator right now. The Entity-Adjusted Long-Term Holder Realized Loss metric removes internal transfers, truly reflecting the daily volume veterans are actually giving up. This metric hit a cycle peak two weeks ago, and last week's report highlighted that its cooling is a prerequisite for any sustained recovery.
It has now started to decline. One pullback doesn't prove exhaustion, and new shocks could restart selling. But in this cycle, it's the first time this core metric defining the bottoming process has turned from rising to falling. The main sellers driving this bear market are drying up at the margin.
Demand Absorbs Lows Selling
As veterans capitulated, buyers stepped in timely. The Accumulation Trend Score segmented by wallet size shows a broad and strong wave of buying during the June lows, covering wallets from small to large. This intensity has moderated since the price stabilized, entering a waiting mode.
Coins sold at the lows found takers. Whether these buyers return with equal force in the next move will determine if this bottom holds.
Off-Chain / Derivatives Insights
ETF Outflows Slow
US spot ETFs tell the same story of easing but unresolved pressure. Redemption pressure has significantly receded from June's extreme levels, trending towards stabilization. However, the channel is not fully repaired: the week saw its largest single-day outflow in weeks, partially recouped the next day.
Until inflows return and hold, this remains a market where institutions have stopped fleeing but have not yet started buying.
Bears Abandon Resistance
Derivatives markets have been moving in the opposite direction for weeks. The Options Put/Call Ratio has dropped to yearly lows, with traders letting bearish protection expire; perpetual funding rates are just above neutral, far from crowded long levels. Bearish bets are quietly unwinding.
But this unwinding hasn't translated into actual buying. Position adjustments by futures and options traders are not equivalent to capital entering the spot market – the clearest caveat in the current recovery.
Crash Protection Premium Moderates
The premium for crash protection in options markets (measured via 25-Delta Skew) spiked during the June sell-off and has been declining since, now well below February's extreme levels. The cost of hedging each dip is significantly lower than a month ago.
Protection demand persists – as it should with the lows unconfirmed – but the overall direction is normalizing.
Approaching Max Pain
Max Pain is the price at which the largest share of open options expire worthless, and spot price has oscillated around it all year. Bitcoin is now just below this level, challenging it for the first time in weeks.
Historically, reclaiming Max Pain often coincides with a shift to a friendlier market environment, though the transition takes time. A clean break above it would be the first structural signal of an upside breakout from the range; rejection would confirm the caution still priced into options markets.
Crash Protection Costs Decline
Absolute protection costs also confirm the moderating trend. During the recovery, one-month crash protection prices have steadily receded, with hedging demand weakening. The market still pays a premium for downside, but far less than at the lows.
Volatility Enters a Calm Period
A longer-term perspective shows how calm the market has become. The Bitcoin Volatility Index (DVOL) is near one-year lows, and the deep put pressure that erupted in February and June has faded from the volatility surface. Such compression rarely lasts; it's often the backdrop before the next decisive move.
Conclusion
The bottom is still forming, and this week it began to respond. Long-term holder capitulation has receded from its peak, profit-taking has dried up, and the June lows were absorbed by broad-based buying. Bitcoin reacted more strongly to macro good news than other assets, is approaching Max Pain from below, and nearing the Short-Term Holder Cost Basis overhead – the first real test for the recovery.
Confirmation signals are still missing: ETF outflows have slowed but not reversed, derivatives unwinding lacks spot follow-through, and compressed volatility awaits a catalyst. The key signal to change the assessment is spot-driven buying pushing price to effectively break and hold above the Short-Term Holder Cost Basis. If long-term holder losses accelerate again, or price is driven back near the Realized Price, the market returns to range-bound consolidation.
The foundation is laid; the follow-through has yet to arrive.
