Bitcoin's "Bounce Has Ended," Formally Entering Late Bear Market Phase?

Original Author: Glassnode

Original Translation: AididiaoJP, Foresight News

Bitcoin fell 13% this week, with profitability collapsing sharply, realized losses surging, and spot sellers regaining control. US spot ETF investors, having faced resistance near their cost basis, have fallen back into unrealized losses, while the options market continues to price in high risk.

Summary

• Bitcoin fell 13% over the past 7 days, with the price retreating to a position between the realized price and the true market mean. The short-term holder cost basis dropped below the true market mean for the first time (since January 2022), confirming late-stage bear market characteristics.
• The 7-day moving average of the realized profit-loss ratio plummeted from a local high of 3.16 to 0.29, almost mirroring the February panic sell-off. Meanwhile, the 90-day moving average never broke the threshold of 2, confirming that the rebound to $82k was merely a bear market rally, not a structural turning point.
• Total daily realized losses surged to $1.35 billion, with $770 million of this coming from long-term holders capitulating at cycle top positions. This indicates the supply redistribution process is accelerating but remains incomplete.
• Bitcoin was almost precisely rejected near the aggregate cost basis of US spot ETFs at $83k, pushing the average ETF investor back into unrealized losses and reinforcing this price level as significant overhead resistance.
• Spot market selling pressure intensified, with the 7-day spot volume delta turning significantly negative, reaching its weakest level since February. This indicates sellers continue to dominate the order books despite the pullback.
• Implied volatility continues to compress while the volatility risk premium expands, indicating the options market is pricing in higher future volatility than recent actual market performance.
• Skew persists in put premium territory, but the recent sell-off has not triggered a notable increase in downside hedging demand.
• Market maker positioning is concentrated near the current spot price. Bitcoin is in its maximum negative gamma zone, with persistent capital flows favoring protective demand.

Macro Insights

US job openings rose to 7.62 million in April, the highest in nearly two years and 750,000 above market expectations. The 10-year Treasury yield rebounded above 4.45%, with the market pricing in over a 50% probability of a Fed rate hike by year-end, eliminating expectations for any cuts. The US Dollar Index held above 99. Financial conditions are tightening marginally, not loosening.

Bitcoin absorbed this shift more intensely than any other risk asset, with its price falling 13% over the past week to the $67,000 range. US spot ETFs saw outflows of $4.21 billion for three consecutive weeks, the largest institutional redemption wave in 2026. Institutions are de-risking as prices decline, not reacting afterwards. Friday's non-farm payrolls data is a key observation point. Strong data will continue the current distribution pressure; weak data could provide the first conditions for a reset.

On-Chain Insights

Return to Bear Market Territory

The aforementioned macro headwinds have directly translated into on-chain structural deterioration. The 13% decline over the past week pulled the price back from the True Market Mean of $77.8k, a metric tracking the cost basis of actively traded supply and historically acting as the bull-bear market demarcation line. Currently at $67k, the price sits in the middle of this range, failing to hold above the True Market Mean, reaffirming that a bear market continuation remains the dominant pattern.

Notably, the Short-Term Holder Cost Basis has now dropped to $76.4k and fallen below the True Market Mean. This structure last appeared in January 2022. This configuration suggests new buyers are accumulating below the market's key average valuation, a typical late-stage bear market characteristic: the time dimension of the downturn begins to pressure investor conviction, historically making this phase more prone to structural failures or large-scale capitulation.

Profitability Collapses on the Decline

Compounding the structural deterioration, the short-term capital flow environment has shifted sharply due to the recent price decline. The 7-day moving average of the Realized Profit/Loss Ratio has contracted to 0.29, indicating that loss realization is heavily dominating on-chain spending behavior. This aligns almost perfectly with the panic wave seen in early February. On May 7th, this 7-day MA spiked to 3.16 as investors took profits during the $82k rebound, but the 90-day MA never breached the threshold of 2, which corresponds to genuine bull market capital flows. This divergence between short-term and medium-term readings is a clear signal that the rally lacked structural conviction, consistent with a local top formation within a bear market rather than a credible structural shift. The subsequent fall back to 0.29 further confirms this assessment.

New Buyers Under Pressure

Resistance from the bear market top range has directly exposed recently accumulated supply to loss-making territory. The Short-Term Holder Cost Basis Distribution heatmap shows the supply density of recent buyers at different price levels, revealing where STH cost bases are concentrated, and thus where behavioral pressure is most likely to appear.

As the price retreats back towards the $67k level, it is approaching the lower edge of the supply cluster accumulated since February. In this zone, a significant number of short-term holders are watching their unrealized gains compress to breakeven or even turn into losses. Those who accumulated near the $78k-$82k local top are facing the most immediate pressure. Whether they choose to hold or capitulate will determine if the current level can absorb selling pressure or cede way to a deeper decline.

Accelerating Loss Realization Across Cohorts

As recent buyers are pushed back to the lower bound of the three-month range, the pressure from loss realization has expanded beyond the newest accumulation. The current pullback to $67k has pushed total daily realized losses to $1.35 billion, a significant acceleration from baseline levels seen during the previous consolidation period.

Of this, $770 million in daily losses were realized by long-term holders who bought before January 2026. This reflects that, as the bear market extends, cycle-top buyers continue to capitulate. The remainder comes from recent buyers who accumulated between $67k and $82k during 2026 and are being forced out of their positions at a loss as the price falls below their cost basis.

As the bear market matures, this pattern of long-term holders capitulating and passing supply to newer buyers at lower prices is a recurring and necessary feature of the cycle bottoming process. However, the current pace of loss realization suggests this process is not yet complete.

Off-Chain Insights

Breaking Below ETF Cost Basis

Bitcoin's latest rally stalled almost precisely at the aggregate cost basis for US spot ETFs, $83k, transforming a level that previously acted as support into clear resistance. This suggests that a significant number of ETF investors, who were previously in unrealized losses, used the rally to reduce positions or exit at breakeven.

This rejection is particularly noteworthy because ETF flows have been one of the dominant sources of demand in this cycle. When the price struggles to reclaim the average holder's cost basis, it often implies that supply from trapped investors is overwhelming new demand, creating overhead resistance.

Looking ahead, the aggregate ETF cost basis remains a key level to watch. A decisive reclaim would bring the average ETF investor back into profitability and could improve overall sentiment for this cohort. Until then, the failure to hold above this level indicates that ETF holdings remain a headwind, with investors using strength to de-risk rather than accumulate.

Spot Buying Disappears

Spot market capital flows have deteriorated sharply over the past two weeks, with the 7-day spot volume turning negative and reaching its weakest level since the February sell-off. This indicates that aggressive sellers are once again dominating the spot order book, further reinforcing the weakness in recent price action.

What is particularly notable about the current move is that it follows a period of sustained spot-led accumulation in April and early May. During that rally, buyers consistently pushed up bids, turning spot volume delta positive and helping Bitcoin recover from the mid-$60k range to $80k. That demand impulse has now dissipated, and with the price failing to break higher, sellers have regained control.

A persistently negative spot volume delta is often associated with either a capitulation event or the early stages of a broader trend reversal. For now, it suggests the market remains in a distribution phase, with spot participants using rallies to sell rather than accumulate. A significant improvement in spot demand remains one of the key signals for a sustainable recovery.

Futures Liquidations

The recent market pullback triggered one of the largest liquidation events of this cycle, with over $400 million in leveraged long positions forcibly closed as Bitcoin fell below $70k. While painful for late entrants, such events often help clear excess leverage from the system and reset market positioning.

Notably, the scale of this liquidation remains lower than during the corrections in October 2025 and February 2026, suggesting that leverage was not excessively stretched entering this decline. Historically, large long liquidation cascades often coincide with local exhaustion points, as forced selling cascades through the derivatives market and clears out weak hands.

The key question going forward is whether spot demand can step in to absorb the supply. If liquidation-driven selling pressure begins to subside while spot buyers return, the market could emerge with a cleaner positioning backdrop and lower leverage overhang, setting the stage for a more sustainable recovery.

Implied Volatility Continues Downward

From an implied volatility perspective, despite the breakdown in spot price, the dominant trend remains a compression across the entire term structure. The 1-month tenor has fallen from around 38% to 34%, while 3-month and 6-month tenors have also compressed by about 3 volatility points each over the past two weeks.

This movement reflects the market's continued reluctance to pay premiums for options even after Bitcoin broke below its recent range low. While front-end volatility saw brief reactions during periods of sharp spot price movement, these were quickly sold into, maintaining the broader downward trend.

The term structure remains in contango, with forward volatility still trading at a premium to the front end. This indicates that traders continue to view the recent price weakness as a local event, not a catalyst for a broader vol repricing.

Volatility sellers remain dominant, and demand for protection has not accelerated despite weaker prices.

Volatility Risk Premium Near Three-Month High

As implied volatility declines, the relationship between implied and realized volatility tells a different story. Despite Bitcoin undergoing a volatile period, the options market continues to price in significantly more volatility for the future than what recent spot action has delivered.

The 1-month implied volatility has risen back to around 42%, while realized volatility remains near 32%. As a result, the volatility risk premium has expanded to levels near the highest seen in the past three months.

This change is particularly evident during the recent sell-off. While realized volatility picked up as spot broke through key support, implied volatility rose even faster, reflecting new demand for options and protection.

The options market continues to assign a higher probability to future volatility than what recent price action alone suggests, keeping the volatility premium at significant levels.

Put Premium Remains Elevated

As the volatility risk premium expands, skew shows where traders continue to focus their options demand. Despite the spot breakdown, puts remain consistently more expensive than calls across the entire term structure.

Conclusion

Bitcoin's latest decline further confirms the view that the market remains fragile, with weakness evident across profitability, investor behavior, ETF holdings, and spot market demand. The rejection at the aggregate ETF cost base of around $83k indicates that many investors are still trapped above the current price. This creates selling pressure at higher levels, continuously suppressing Bitcoin's rallies.

Meanwhile, realized losses are accelerating, with long-term holders beginning to sell in size, and spot order flow has clearly turned in favor of sellers. While the recent liquidation events help clear leverage from the system, there is little evidence yet of a durable demand response capable of absorbing the resulting supply.

The options market tells a similar story. Traders continue paying up for downside protection and future volatility, but without the panic that often accompanies sharp declines. Until spot demand strengthens, ETF investors regain profitability, and selling pressure begins to ease, the market may remain at risk of further downside, continuing to consolidate within a broader bear market structure.