Glassnode: Crypto Market Enters Late-Stage Bottoming Phase
- Core View: The Bitcoin market exhibits characteristics of late-stage bear market, with prices having been in a deep undervaluation zone for five consecutive months. Realized losses by long-term holders have hit a new high since December 2022, but the conditions necessary for a market bottom are essentially in place. A reversal awaits the emergence of key signals.
- Key Elements:
- Price Status: The current price of Bitcoin (approximately $64,400) is significantly lower than the realized market price of $76,600 and the short-term holder cost basis of $72,200. This discount has persisted for nearly five months, placing it in a historically deep undervaluation zone.
- Long-Term Holder Selling Pressure: Realized losses from long-term holders account for 43% of the total on-chain realized losses, with a single-day peak of $280 million in realized losses – the highest since December 2022. Moreover, the selling pressure has yet to show any signs of subsiding.
- ETF Fund Flows: The net outflow from spot ETFs has moderated from its early June peak ($193 million/day) to $88.9 million/day, but monthly net outflows persist, indicating that institutional buying demand has not stabilized. Average daily trading volume has shrunk by approximately 80% from its October 2025 peak.
- Derivatives Positioning: The options put/call ratio has fallen to 0.56, a year-to-date low. Perpetual contract funding rates are below the 0.01% equilibrium line, suggesting the market has shifted from crowded shorting to cautious bullishness.
- Volatility and Hedging Costs: The options skew still prices in downside risk, with the 25-delta volatility skew maintaining a premium. However, actual hedging costs have declined. The DVOL volatility index has dropped to a 12-month low, indicating a gradual reduction in hedging demand.
Original Authors: CryptoVizArt, Frederik Theissen, Glassnode
Original Compiled by: Luffy, Foresight News
Bitcoin price has been below the Realized Price and Short-Term Holder cost basis for five consecutive months, residing in a deeply undervalued zone.
The proportion of realized losses from long-term holders relative to total on-chain realized losses has risen to 43%, with daily realized losses peaking at $280 million, the highest level since December 2022. Spot ETF outflows have moderated but remain net negative on a monthly basis; average daily ETF trading volume is between $650 million and $950 million, down approximately 80% from the October 2025 cycle peak, indicating institutional buying demand has yet to stabilize.
Derivatives positioning has shifted to cautiously bullish, with the put/call ratio hitting a year-to-date low. However, the options volatility surface still maintains a defensive premium, and spot prices are significantly below the max pain point. The market has entered the late stages of bottoming, and the continued narrowing of selling pressure from long-term holders is a crucial prerequisite for a trend reversal and recovery.
Macro Perspective
Crude Oil Surges, Risk Assets Under Collective Pressure
Over the past seven trading days, WTI crude oil has risen by a cumulative 7.9%, with the majority of gains concentrated recently, amidst reports that the US-Iran Memorandum of Understanding has expired. This shock has impacted all asset markets. Bitcoin saw a weekly high of 9.4% but has since retreated to a 5% weekly gain; the S&P 500 and Euro Stoxx indices have turned negative, with European stocks leading the global risk asset decline. Currently, Bitcoin's trajectory is highly correlated with risk assets.
Liquidity Environment: Intensifying Bull-Bear Contradictions
Amidst the external shock from crude oil, the market liquidity environment presents a fragmented picture. US M2 money supply has climbed to a record high of $22.8 trillion. Historically, broad money expansion cycles often boost market risk appetite. However, the Fed's balance sheet continues to shrink, currently $2 trillion lower than its 2023 peak. These two liquidity signals form a strong hedge: the broad money supply is rising, while quantitative tightening continues, with real interest rates hovering near 1%, keeping the opportunity cost of holding non-yielding digital assets high. The macro window of opportunity hasn't completely closed, but neither has it formed a clear dovish support.
On-Chain Data
A Five-Month Period of Deep Undervaluation
Over the past week, Bitcoin has rebounded from $58,300 to $64,400, showing short-term improvement, but the price remains significantly below the realized price of $76,600 and the short-term holder cost basis of $72,200. Only if the price reclaims these two key levels can the market escape the deep undervaluation zone; otherwise, the market remains susceptible to declines triggered by negative external catalysts.
The duration of this discount period is noteworthy. Since early February 2026, Bitcoin's price has consistently traded below the active investor cost basis and the breakeven level of recent entrants, lasting nearly five months. This represents one of the longest periods of deep discount in Bitcoin's history.
This prolonged period of discount, involving significant capitulation and new capital entering below the cost basis of previous buyers and the overall active market, is historically the foundation for forming cycle bottoms, offering long-term appeal for value investors. Various indicators suggest the bottoming process is in its latter half, but a potential retest of the $53,000 level cannot be entirely ruled out.
Concentrated Stop-Loss by Long-Term Holders at High Costs
As the market builds a cycle bottom, the core question is identifying the primary source of downward selling pressure. The Long-Term Holder vs. Short-Term Holder Spent Realized Profit/Loss Ratio tracks the distribution of on-chain realized profits and losses between these two groups, clearly showing the proportion of each in the total realized volume.
Since Bitcoin's price fell below the realized price, the 30-day moving average of the proportion of losses realized by long-term holders has climbed from 15% in early February 2026 to the current 43%. The stop-loss selling pressure from this group, driven by unrealized losses on their holdings, has become the most dominant bearish force suppressing the price.
These investors mostly entered near the cycle peak. After months of deep retracement, their holding conviction has gradually eroded, leading to a concentrated exit. This on-chain structure directly explains why each rebound attempt meets concentrated selling from deeply underwater holders, making it difficult for the price to sustainably hold the upper range.
Stop-Loss Selling Pressure Shows No Signs of Abating
Realized losses from long-term holders have become the primary market 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) measures the USD value of losses realized by coins older than 155 days, filtering out internal transfers to accurately reflect genuine stop-loss behavior. This indicator recently hit a daily peak of approximately $280 million, the highest since December 2022, marking the second significant wave of long-term holder capitulation in this bear cycle.
The crucial difference is that after the first peak in stop-losses, the pressure declined in stages, but this current wave of selling has yet to show any contraction in scale. Only a clear downtrend in this indicator can provide the groundwork for a potential shift towards a bull market. Its trajectory over the coming weeks and months will be the key signal in determining whether the market has truly completed the phase of selling pressure exhaustion.
Off-Chain Markets
ETF Outflows Slow, but Trend Unreversed
Shifting from on-chain to off-chain markets, spot ETF flows provide direct insight into institutional capital behavior. The 30-day moving average of ETF net flows smooths out daily volatility in net capital flows to or from US spot Bitcoin ETFs, revealing underlying trends in institutional positioning.
Since mid-May 2026, this metric has entered a phase of monthly net outflows. Daily outflows peaked at $193 million in early June and have since moderated to a daily net outflow of $88.9 million. The slowing outflow pace is a mild positive, but monthly capital continues to bleed from the market, and institutional buying demand has not stabilized. Only when capital flows consistently narrow to a balanced range can one reasonably anticipate short-term expansionary rallies.
Institutional Trading Volume Remains Depressed
Beyond net flow data, US spot ETF trading volume helps assess the degree of institutional confidence recovery. The 30-day moving average of daily ETF trading volume currently oscillates between $650 million and $950 million. This level is comparable to Q4 2024 but roughly 80% lower than the daily peak of $4.4 billion set in October 2025.
Current volume levels indicate only baseline institutional participation, remaining exceptionally low compared to cycle highs. This suggests that medium-to-long-term bullish conviction among ETF investors has not materially returned. Only when daily trading volume shows sustained expansion, accompanied by a continued narrowing of net capital outflows, can the return of institutional demand be confirmed. Until both signals improve simultaneously, the off-chain data corroborates the on-chain indicators, suggesting the market remains under bearish dominance.
Derivatives Market
Short Squeeze, Positioning Turns Cautiously Bullish
Amidst the weak risk sentiment, derivatives positioning structure has shown a contrarian shift. The put/call ratio for open interest in options has fallen to 0.56, the lowest level in 2026, implying roughly two call options for every one put option. Options flow data confirms this trend: two weeks ago, during Bitcoin's second test of lows, there was aggressive buying of puts for hedging, significantly spiking the put/call volume ratio. However, as call orders have consistently returned, the ratio has fallen rapidly, even though spot prices have only partially recovered.
Perpetual swap funding rates also corroborate this shift in positioning. The average perpetual funding rate has remained below the 0.01% bull-bear equilibrium line for an extended period, far from levels seen in crowded long markets. The derivatives market has completed a short-squeeze, shifting overall to a cautiously bullish stance amidst negative external shocks, a complete reversal from the crowded short positioning seen before the previous sharp decline.
Options Surface Still Prices Downside Risk
While overall positioning is bullish, the options volatility surface sends a contrasting signal. The 25-delta risk reversal (measuring the premium for downside puts relative to upside calls) maintains a premium across all tenors. Each sell-off this year has pushed this premium higher. It surged to 24% at the end of June, marking the strongest defensive sentiment for front-month contracts since the February sell-off. Despite the market's overall bullish positioning bias, traders are still willing to pay a premium for downside hedging instruments.
Spot Price Deviates from Max Pain Level
Beyond positioning and volatility skew, the relative position of the spot price to the options market structure offers further clues. The current Bitcoin spot price is roughly 6% below the aggregate market max pain point of $66,000. The max pain point is the strike price where the most open contracts expire worthless, and options markets often gravitate towards this level near expiry.
This week's decline has widened the gap between the spot price and the max pain level, but the deviation is far less extreme than during the February sell-off, sitting only in the middle of the 2026 range. Throughout the year, the max pain level has consistently acted as a gravitational center, with the spot price oscillating around it and rarely experiencing prolonged large deviations. If the price can decisively reclaim and hold $66,000, short-term signals turn more optimistic. If the gap widens further, it would reinforce the overall defensive trading sentiment observed in the options market.
Cost of Crash Hedging Continues to Decline
There's a divergence between the volatility skew and positioning signals, but the absolute cost of hedging downside risk presents a clear trend. Following the market's modest rebound, the overall pricing for the put side of the 1-month volatility curve has shifted lower; the implied volatility for put options 5% below the spot price has fallen significantly. The lowest pricing points on the volatility curve are concentrated in long-dated call options.
While overall market defensive sentiment persists, the absolute cost traders pay for downside hedging has clearly decreased. This trend becomes more apparent over a longer time frame: the volatility premium from extreme put hedging demand during the February and June sell-offs has gradually dissipated entering July. The DVOL volatility index has fallen to 12-month lows. The market has entered a low-volatility regime, and while caution still dominates, the demand for hedging is gradually fading.
Summary
A comprehensive analysis of on-chain, off-chain, and derivatives data clearly reveals characteristics of a late-stage bear market.
On-chain data shows a prolonged five-month deep undervaluation cycle, with daily stop-loss realization by long-term holders reaching $280 million and significant coin redistribution underway. However, a sustained decline in this stop-loss metric is a necessary prerequisite for a valid trend reversal.
Off-chain, ETF capital outflows have narrowed from their June peak but remain persistently net negative on a monthly basis. Average daily trading volume has contracted by 80% from the October 2025 peak, underscoring low institutional bullish conviction.
In derivatives, market positioning has shifted to cautiously bullish, with the put/call ratio hitting a yearly low. However, the volatility skew and options surface still consistently price-in downside risk.
Considering all indicators, the essential conditions for market bottoming are now in place, but the core signal confirming the bottom has yet to emerge. The subsequent market trajectory requires three conditions to be met: continued cooling of stop-loss selling pressure from long-term holders, stabilization of institutional capital flows, and a decisive reclaim of the realized price level. Only upon meeting these conditions will the probability of a shift towards a bull cycle significantly increase.
