Surface Pressure, Underlying Strength: Is Bitcoin in the Early Stages of Bottoming?

Original Author: Glassnode

Original Translation: AididiaoJP, Foresight News

Bitcoin's price has dropped below $60,000, with persistent institutional outflows and defensive positioning in the options market weighing on sentiment. However, beneath the surface, long-term holders and patient buyers are gradually absorbing sell-side pressure, hinting that a bottoming process may have quietly begun.

Key Takeaways

• Long-term holders have returned to accumulation mode, with experienced investors once again accumulating coins during the market pullback.
• Widespread accumulation is observed across multiple wallet cohorts, showing growing investor confidence amid price weakness.
• A majority of Bitcoin supply is currently in a state of loss, exceeding the supply in profit, reflecting broad investor stress and a shift of coins towards more resolute holders.
• US spot Bitcoin ETFs continue to see net outflows, extending the institutional de-risking trend.
• The Coinbase order book is notably skewed towards bid orders, as institutions patiently provide liquidity, rebuilding support at lower prices.
• Leveraged traders have significantly increased their long exposure, setting the stage for either a sharp rebound or a new wave of long liquidations.
• Market makers' gamma positioning is becoming increasingly favorable, with hedging flows expected to dampen volatility and promote price stability.
• Options traders are paying a premium for downside protection, indicating a clear defensive market stance and heightened hedging demand.
• Implied volatility is rising, suggesting Bitcoin is entering a bottoming phase, though a final fear-driven volatility spike cannot be ruled out.

Macro Overview

The Federal Reserve held interest rates steady for the fourth consecutive meeting in June, but the true market impact came from the tone, not the decision itself. The new Fed Chair, Kevin Warsh, adopted a distinctly hawkish stance. With inflation stubbornly above target and tariff pass-through effects continuing to lift consumer prices, the market has largely priced out expectations for rate cuts this year. Any policy easing seems unlikely before 2027 at the earliest. Treasury yields have climbed back to highs seen in 2026, the US dollar has strengthened, and while the labor market continues to add jobs, signs of narrowing concentration are emerging. Financial conditions remain tight, with few catalysts in the near term to improve the situation.

Bitcoin has been a primary casualty of this repricing. After a strong first quarter, June saw the most significant institutional retreat since the launch of spot ETFs: the persistent redemption wave appears more driven by rational profit-taking than panic selling – many institutional positions were built at much lower price levels. The selling pressure, while orderly, has been relentless, pushing Bitcoin's price back into a range that resets short-term expectations. As the third quarter begins, the key question is whether the macro environment can stabilize to revive risk appetite, or if sticky inflation and a strong dollar will continue to weigh on the most liquidity-sensitive assets.

On-Chain Insights

Long-Term Holders Return to Accumulation

Long-term holders are rebuilding their positions after a prolonged period of distribution, with the net position change firmly turning positive. Although the pace of accumulation is modest compared to the aggressive buying seen during prior bull market expansions, it marks a significant behavioral shift – the most convicted Bitcoin investor cohort is beginning to absorb supply once again.

This shift occurs as Bitcoin retraces towards $60,000, suggesting experienced holders view the recent pullback as an opportunity rather than a reason to reduce exposure. Historically, a sustained transition from net distribution to net accumulation takes place during market weakness, as long-term investors gradually add while short-term participants de-risk. While it is too early to declare a full-fledged accumulation phase, the persistent return of long-term buying is a positive signal: conviction is quietly being rebuilt beneath the surface.

Broad Accumulation Seen

The Bitcoin Accumulation Trend Score has improved significantly over the past month, with buying activity becoming increasingly widespread across investor cohorts. Following months of distribution during the market decline, most wallet cohorts have now shifted to accumulation, indicating that the recent pullback is beginning to attract new demand.

The strongest accumulation currently is seen in small holders (less than 1 BTC) and entities holding 100-1000 BTC, both with trend scores near their maximum levels. Meanwhile, larger cohorts, including wallets holding 1000-10000 BTC, have also turned to net buying, albeit with less intensity than earlier in the cycle. This synchronized improvement across multiple investor groups suggests confidence is being rebuilt after the retracement, with market participants increasingly willing to absorb sell-side pressure near current prices. Historically, when accumulation broadens across different wallet sizes, it lays a constructive foundation for long-term market recovery, though confirmation through sustained buying is still needed.

Most Bitcoin is in a Loss Position

The recent sell-off has pushed the market to a significant psychological and structural milestone: the amount of Bitcoin in a state of loss now exceeds the amount in profit. According to the latest data, approximately 10.83 million BTC are underwater, compared to about 9.22 million BTC that are profitable. This represents one of the most significant deteriorations in investor profitability during this bull cycle, reflecting the extent of the recent repricing.

Historically, periods where loss-dominating supply exceeds profit-dominating supply coincide with high financial stress and broad capitulation among newer market entrants. While this is negative for short-term sentiment, it also creates conditions for stronger hands to absorb coins from weaker ones. Combined with the re-accumulation by long-term holders and other groups, the sharp decline in profitability suggests the market is entering a phase where coins are migrating to higher-conviction investors.

Off-Chain Insights

ETF Outflows Accelerate

Institutional demand continues to deteriorate, with the 7-day moving average net outflow from US spot ETFs pushing further into negative territory. After a brief recovery in May, capital flows have reversed again, and sustained outflows have become the norm as Bitcoin slides toward $60,000. The persistence of redemptions indicates institutions remain in a defensive posture, choosing to reduce exposure rather than stepping in to buy the dip.

This stands in stark contrast to the strong ETF demand that previously drove market rallies. While on-chain data shows re-accumulation by long-term holders and various cohorts, ETF investors have not yet demonstrated the same conviction. This divergence highlights a market currently supported by patient on-chain capital, while more price-sensitive institutional participants continue to withdraw liquidity. Stabilization in ETF flows will be a crucial signal to monitor for confirmation of broader investor confidence recovery.

Hyperliquid Leveraged Traders Strongly Bullish

Positions on Hyperliquid have largely turned long, with net long exposure steadily increasing even as Bitcoin's price continues to decline. Far from reducing exposure during the weakness, leveraged traders are adding to their bullish bets, pushing long bias to the highest levels observed in the period.

This creates an increasingly asymmetric market structure. If buyers regain control, the large accumulation of long positions could fuel a sharp rebound. However, as long as the price remains in a clear downtrend, the buildup of levered longs also makes the market vulnerable to further downside if support levels fail. In such a scenario, forced liquidations of overstretched longs would amplify volatility and accelerate the decline. Current data suggests derivatives traders are positioning for a reversal, but this conviction still needs to be validated by price action.

Options Market Maker Positioning Aids Volatility Suppression

The Deribit GEX heatmap shows that the options market near the current price is dominated by positive gamma positioning, with a significant concentration forming around the lower $60,000 range. When market makers are long gamma, they typically hedge by buying into weakness and selling into strength, a dynamic that naturally dampens volatility and encourages price stability around high open interest strike prices.

This implies that, despite the recent sell-off, the options market is no longer bracing for accelerated downside. Instead, market maker hedging flows are increasingly acting as a source of liquidity, helping to absorb directional volatility and reduce the likelihood of disorderly price action. This does not necessarily signal an imminent reversal, but it indicates a transition from the highly unstable state during the decline. Unless a major macro catalyst forces prices away from these gamma-dense zones, options positioning points towards a period of consolidation and lower realized volatility, rather than a fresh wave of panic selling.

Options Traders Pay Premium for Downside Protection

The options market has turned defensive, with the 14-day put/call volume ratio surging above 1.0, reaching its highest level in the past year. This indicates put activity has outstripped call buying, reflecting traders prioritizing downside protection over upside participation as Bitcoin falls towards $60,000.

Historically, high put/call ratios appear during periods of high uncertainty, with investors either hedging spot exposure or expressing bearish views. While this reinforces the cautious tone seen in ETF flows and recent price action, it can also act as a contrarian signal if hedging demand becomes excessive. When a large number of participants have already positioned defensively, the market becomes less vulnerable to incremental selling pressure. For now, however, the options market shows that risk management, rather than recovery speculation, remains the dominant priority.

Implied Volatility Rebounds

Bitcoin's Implied Volatility Index (DVOL) has started to recover from historical lows following the recent sell-off, but remains well below the panic extremes typically seen during major market dislocations. This suggests options traders are beginning to price in greater future price swings and rising uncertainty, but expectations have not yet reached the level of fear historically associated with durable lows.

Structurally, this looks more like the early stages of a bottoming process rather than the end. Volatility begins to reprice as the market searches for a bottom, but cyclical lows in the past have often been accompanied by a final volatility spike, triggered by forced selling, liquidations, or a macro shock inducing capitulation. If such a spike occurs, it would likely coincide with indiscriminate selling and high stress in the derivatives market. Until then, the gradual increase in implied volatility suggests traders are preparing for larger moves, although the final washout required for a durable bottom may not have happened yet.

Conclusion

Bitcoin remains in a clear corrective phase, but beneath the weak price action, some important structural shifts are beginning to emerge. Long-term holders are accumulating again, buying activity is broadening across multiple wallet cohorts, and spot order books (Binance and Coinbase) are increasingly skewed towards bids. These changes are typically associated with patient capital stepping in as weaker hands exit.

At the same time, caution is warranted. Institutional capital continues to flow out of US spot ETFs, options traders are actively hedging downside risk, and leveraged long positions have reached high levels, leaving the market susceptible to another wave of liquidation-driven selling. Implied volatility also suggests the market may still need to undergo one final washout to establish a bottom.

Overall, the data indicates that Bitcoin is transitioning from a distribution phase towards an accumulation phase, but confirmation is still needed. While the foundations for a long-term recovery are slowly being laid, the market may first have to endure a final test of conviction before a sustainable uptrend can emerge.