After months of steadily rising to record highs, bitcoin’s The pulse has slowed, with BTC changing hands above $111,000 on Friday afternoon, Hong Kong time, up 2% over the past week, according to CoinDesk market data.
The pullback from the recent high above $126,000 is marked by momentum faltering below key cost basis levels, with capital exiting the spot market and ETFs, along with defensive options positioning.
In a recent report, Glassnode frames the repeated splits below key quantiles as evidence of market fatigue. At the same time, CryptoQuant, in a note shared with CoinDesk, finds similar stress in shrinking realized profits and drained currency inflows.
Capital, they both argue, remains in crypto but rotates from spot to derivatives, where volatility itself is now the main traded asset. Until the balance is reset, rallies will likely fade rather than be followed.
Glassnode points to the short-term holders’ cost basis around $113,000 as the dividing line between renewed strength and deeper consolidation. Falling below that threshold, the firm says, signals that recent buyers are now at a loss, eroding confidence and forcing weaker hands to capitulate.
Long-term owners, meanwhile, have been selling for strength at a pace exceeding 22,000 BTC per day since July, a trend that continues to dampen momentum and weigh on any sustained recovery. If bitcoin fails to regain the $113,000 line, Glassnode warns that losses could deepen toward the $108,000-$97,000 range, where 15%-25% of supply has historically become unprofitable.
CryptoQuant’s data reinforces this view from a flow perspective. ETF inflows have cooled after months of accumulation, while currency reserves are rising again, a sign that traders are preparing to sell to volatility rather than accumulate.
The firm characterizes this as a rotation of capital within crypto rather than a full exit, as liquidity migrates towards futures and options markets where volatility premiums have increased. This reflects structural shifts seen in 2021 and mid-2022, where speculative leverage replaced spot dom.
Options data reflects the broader sense of caution. Glassnode reports record open interest as traders increasingly rely on derivatives to hedge rather than bet on the upside, with demand rising across maturities.
Glassnode notes that market maker hedging has tended to smooth out short-term price action, selling on rallies and buying dips to remain delta (market) neutral. Increased volatility and high demand on demand are holding the market tight, with gains limited by hedging flows rather than broad conviction.
This dynamic has left the market in a limbo where price action is shaped more by risk management than by directional conviction.
Interpreting these flows as a sign of consolidation rather than collapse, CryptoQuant writes that liquidity remains within the crypto ecosystem, rotating through various instruments as investors wait for clearer macro or political signals before committing new capital.
Both firms suggest that a meaningful recovery will require renewed spot demand and quieter derivatives activity, conditions that could depend on the timing of Fed rate cuts or a revival of ETF inflows.
For now, bitcoin isn’t breaking so much as breathing, acting less like a revolution and more like a rotation. Volatility may still be the market’s preferred asset class, but sooner or later even traders tire of trading fear.
