Bitcoin bottoming in progress: Long-term holder selling pressure eases, ETF outflows slow down

Original Author: Glassnode

Original Translation: AididiaoJP

Bitcoin's bottom is still being built, but its characteristics are quietly shifting. The capitulation selling by long-term holders is beginning to cool off, buyers have successfully absorbed the June lows, and the price is gradually recovering, challenging the zone that previously suppressed it.

Executive Summary

• The market has begun testing the resistance level above.
• Bitcoin's reaction to weak inflation data was far stronger than any major stock index, marking its most positive response to good news in weeks.
• The correlation with the stock market is loosening, while the inverse linkage with the US dollar is deepening—the current driving factor is liquidity, not risk appetite.
• Selling by long-term holders—the main source of selling pressure this year—has receded from its peak.
• Profit-taking has decreased significantly, with buying fully absorbing the selling at the June lows, reducing the supply pressure faced by each rebound.
• The cost basis of short-term holders is near $69,000, the breakeven point for recent buyers, which will form the next key resistance; a strong reaction is expected there.
• Derivatives traders are unwinding bearish positions, but spot buying has yet to follow, the missing piece in the current recovery.

Macro Insights

The pressure Bitcoin faces this quarter is essentially a story of real interest rates, not risk aversion. The 10-year real yield has risen to near 2026 highs, and the US dollar has held above its 200-day moving average since May. However, broader risk assets show no signs of stress: stock markets are near highs, credit spreads are low, and volatility remains subdued.

Bitcoin Leads the Rebound

Following Tuesday's mild inflation data release, Bitcoin outperformed all other major assets. It jumped sharply after the data was published and significantly outpaced US and European stocks over the week. After a month of sideways trading at lows, the market has begun reacting positively to good news again.

This sensitivity is itself a signal: a market eager to rally on a single inflation data point often indicates that sellers are exhausted and buyers are only waiting for a reason.

Shift in Macro Driving Logic

Beneath the rebound, the drivers for Bitcoin are changing. Since winter, its correlation with US stocks has weakened, while its inverse relationship with the US dollar has deepened. Bitcoin looks less like a stock proxy and more like an asset that appreciates when the dollar weakens.

It hasn't detached from risk assets, but the influence of the dollar and liquidity channels now outweighs equity market sentiment. If the macro environment eases from here, this channel is most likely to transmit the effect first.

On-Chain Insights

Between the Floor and the Ceiling

The cost basis chart accurately depicts the current position. Bitcoin's price is above the network-wide average Realized Price—the natural bottom support during bear markets—while 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, with many trapped buyers above waiting to break even.

The first touch of this level will likely trigger a strong reaction, as the group most inclined to sell is precisely those about to break even. Successfully recovering it would open space for further recovery; rejection would extend the range-bound pattern.

Sellers Stop Taking Profits

The Long/Short-Term Holder Realized Profit/Loss Ratio breaks down all on-chain selling into four categories: veterans and newcomers, each selling at a profit or loss. For most of this cycle, long-term holders selling at a profit dominated the sell-side. This flow has now nearly dried up; veterans are now mostly selling at a loss.

Loss-making sales by both groups represent the dominant on-chain transaction characteristic, a typical late-stage bear market signal. The key change is that the proportion of selling by long-term holders has stopped growing. The wave of selling pressure that met every rebound earlier this year is no longer expanding.

Capitulation Selling Begins to Cool

This capitulation pace is the most important indicator currently. The entity-adjusted realized loss for long-term holders filters out internal transfers, reflecting the actual amount veterans are relinquishing daily. This metric hit a cycle peak two weeks ago. In last week's report, we explicitly stated that a cooling of this indicator was a prerequisite for any lasting recovery.

It has now begun to decline. A single decline doesn't prove complete exhaustion; new shocks could restart selling. But in this cycle, it's the first time this core indicator defining the bottoming process has shifted from rising to falling. The primary sellers driving this bear market are, on the margin, becoming exhausted.

Demand Absorbs Low-Point Selling

While veterans capitulated, buyers stepped in just in time. The accumulation trend score by wallet size shows a broad and strong wave of buying during the June lows, covering wallets from small to large. This strength has waned after prices stabilized, putting the market into a waiting mode.

The coins sold at the lows found takers. Whether these buyers return with equal force during the next move will determine if this bottom can hold.

Off-Chain / Derivatives Insights

ETF Outflows Slow

US spot ETFs tell the same story of easing pressure without resolution. Redemption pressure has fallen significantly from extreme June levels, with the trend pointing towards stabilization. However, the channel isn't fully repaired: a day this week saw the largest single-day outflow in weeks, though it was partially reversed the next day.

Until inflows truly return and stabilize, this remains a market where institutions have stopped fleeing but haven't yet started buying.

Bears Give Up the Fight

The derivatives market has moved in the opposite direction for weeks. The options put/call ratio has dropped to its lowest this year, as traders let bearish protection expire; perpetual contract funding rates are only slightly above neutral, far from crowded long levels. Bearish bets are quietly and steadily being exited.

But this unwinding hasn't translated into actual buying. Position adjustments by futures and options traders do not equate to capital entering the spot market, the clearest warning sign in the current recovery.

Panic Premium Eases

The premium for crash protection in the options market (measured by 25-Delta Skew) spiked during the June sell-off but has been steadily declining since, now far below the extreme levels seen in February. The cost of hedging against a pullback is significantly lower than a month ago.

Demand for protection persists—as expected when the lows are not yet confirmed—but the overall direction is towards normalization.

Approaching Max Pain

Max Pain, the price at which the largest share of open options expires worthless, has been the level around which the spot price has oscillated this year. Bitcoin is currently just below this level and is challenging it for the first time in weeks.

Historically, reclaiming Max Pain often aligns with a shift to a more favorable market environment, although the transition takes time. A clean break above this level would be the first structural signal of an upside breakout from the range; a rejection would confirm the cautious sentiment still priced into the options market.

Cost of Crash Protection Declines

The absolute cost of protection also confirms the easing trend. During the recovery, the price of one-month crash protection has steadily fallen, indicating reduced hedging demand. The market still pays a premium for the downside, but it is far lower than the levels seen at the lows.

Volatility Enters a Calm Period

A longer-term perspective reveals how quiet the market has become. Bitcoin's volatility index (DVOL) is near one-year lows, and the deep bearish pressure that erupted in February and June has faded from the volatility surface. Such compression rarely persists, often serving as the backdrop before the next decisive move.

Conclusion

The bottom is still being built, and this week it began to respond. Capitulation by long-term holders has receded from its peak, profit-taking has dried up, and the June lows were absorbed by widespread buying. Bitcoin's reaction to positive macro data has been stronger than other assets, it is approaching Max Pain from below, and is nearing the short-term holder cost basis above—which will be the first real test for the recovery.

Confirmation signals are still absent: ETF outflows have eased but not reversed, derivative unwinding lacks spot follow-through, and volatility compression awaits a catalyst. The key signal for a change in judgment would be spot-driven buying pushing the price to effectively break and hold above the short-term holder cost basis. If long-term holder losses accelerate again, or the price is pushed back near the Realized Price, the market will return to range-bound trading.

The foundation has been laid, but the follow-through has yet to arrive.