Glassnode: Crypto market entering late stages of bottoming phase

Original authors: CryptoVizArt, Frederik Theissen, Glassnode

Original translation: Luffy, Foresight News

Bitcoin price has been below the realized market price and short-term holder cost basis for five consecutive months, placing it in a deep undervaluation zone.

The proportion of realized losses from long-term holders relative to total on-chain realized losses has risen to 43%. Daily realized losses from this group peaked at $280 million, the highest level since December 2022. While spot ETF outflows have moderated, they remain net negative on a monthly basis. Average daily ETF trading volume holds between $650 million and $950 million, roughly 80% lower than the peak during the October 2025 rally. Institutional buying demand has yet to stabilize.

Derivatives positioning has shifted to cautiously bullish, with the put/call ratio falling to its lowest point in 2026. However, the options volatility surface still maintains a defensive premium, with spot prices significantly below the max pain point. The market appears to be in the late stage of bottoming, and a sustained decline in selling pressure from long-term holders is a key prerequisite for a trend reversal and recovery.

Macro Perspective

Crude Oil Surge Weighs on Risk Assets

Over the past seven trading days, WTI crude oil has surged 7.9%, with most gains concentrated recently. News that the US-Iran Memorandum of Understanding had expired sent shockwaves through all asset markets. Bitcoin saw a weekly high of 9.4% gains but has since retreated to around 5%. The S&P 500 and Euro Stoxx indices turned negative, with European stocks leading the decline in global risk assets. Currently, Bitcoin's price action remains highly correlated with risk assets.

Liquidity Environment: Intensifying Bull-Bear Conflict

Against the backdrop of the crude oil shock, the market's liquidity environment is showing signs of fragmentation. US broad money supply (M2) has climbed to a record high of $22.8 trillion. Historically, broad money expansion cycles tend to boost market risk appetite. However, the Federal Reserve's balance sheet continues to shrink, now $2 trillion below its 2023 peak. These two liquidity signals create a strong hedge: broad money supply is rising, while quantitative tightening continues. Real interest rates remain around 1%, keeping the opportunity cost of holding non-yielding digital assets high. The macro window for bullish catalysts is not completely closed, but neither has a clear easing support materialized.

On-Chain Data

Five Months of Deep Undervaluation

Over the past week, Bitcoin rebounded from $58,300 to $64,400, showing some short-term recovery. However, the price remains significantly below the realized market price of $76,600 and the short-term holder cost basis of $72,200. Only a reclaim of these two key levels would lift the market out of the deep undervaluation zone. Otherwise, the market remains susceptible to further downside catalysts.

The duration of this discount period is particularly noteworthy. Since early February 2026, the price has consistently traded below both the active investor cost basis and the breakeven point for recent entrants, a period lasting nearly five months. This represents one of the longest deep-discount cycles in Bitcoin's history.

This prolonged period of below-cost trading facilitates significant distribution of coins, with new capital accumulating below the cost basis of previous buyers and the entire active market. Historically, this process forms the foundation for a cyclical bottom, offering attractive long-term entry points for value-oriented investors. While various indicators suggest the bottoming process is in its latter stages, a potential retest of the $53,000 level cannot be ruled out.

STOP-LOSS CONCENTRATION AMONG LONG-TERM HOLDERS WITH HIGH COST BASIS

The market is building a cyclical bottom. The core question now is identifying the primary source of downward sell pressure. The realized profit/loss ratio between long-term and short-term holders measures the proportion of total on-chain realized profits and losses attributable to each group, providing insight into distribution dynamics.

Since the price fell below the realized market price, the 30-day moving average proportion of realized losses coming from 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 underwater positions, has become the most significant bearish force suppressing the price.

These investors largely entered the market near the cyclical top. After months of deep drawdowns, their conviction has waned, leading to a wave of concentrated exits. This coin distribution pattern directly explains why each recent rally has been met with heavy selling from deeply underwater holders, preventing the price from sustainably holding above the current range.

Selling Pressure from Stop-Losses Yet to Show Signs of Abating

Realized losses by long-term holders are now the primary downward pressure. The key observation going forward is whether this selling force begins to subside.

The entity-adjusted realized loss metric for long-term holders (30-day smoothed moving average) tracks the dollar value of losses realized by users holding coins for over 155 days, filtering out internal wallet transfers. This accurately captures genuine stop-loss exit behavior. This metric recently hit a single-day peak of approximately $280 million in realized losses, the highest since December 2022 and the second major wave of long-term holder capitulation in this bear cycle.

A critical difference is that following the first wave of capitulation, the sell pressure saw a period of decline. In contrast, this current wave has yet to show a contraction in scale. A clear downtrend in this metric is a fundamental condition for the market to transition towards a bullish phase. Over the coming weeks and months, the trajectory of this indicator will be the core signal for determining whether the market has truly completed the process of flushing out distressed sellers.

Off-Chain Market

ETF Outflows Slow, But Trend Unbroken

Shifting from on-chain to off-chain markets, spot ETF capital flows provide a direct view of institutional behavior. The 30-day moving average of ETF net flows smooths out daily fluctuations to reveal underlying trends in institutional positioning.

Since mid-May 2026, this metric has turned into a monthly net outflow channel. The daily outflow peaked at $193 million in early June and has since declined to a net daily outflow of $88.9 million. While the slowing outflow is a mildly positive sign, the market continues to bleed capital monthly, and institutional buying demand has not stabilized. Only when capital flows narrow consistently to a neutral range can we anticipate an expansive price rally in the short term.

Institutional Trading Volume Remains Depressed

Beyond net flow data, trading volume in US spot ETFs helps gauge the recovery of institutional confidence. The 30-day moving average of average daily trading volume currently fluctuates between $650 million and $950 million. This level is comparable to that seen in Q4 2024 but is approximately 80% lower than the average daily peak of $4.4 billion set in October 2025.

The current trading volume represents only baseline institutional engagement, remaining extremely subdued compared to cyclical highs. This indicates that medium-to-long-term bullish conviction among ETF investors has not substantially returned. Only a sustained increase in average daily volume, coupled with a continued narrowing of net capital outflows, would confirm a recovery in institutional demand. Until both signals improve in tandem, the off-chain data corroborates the on-chain picture, suggesting the broader market remains in a bearish dominant structure.

Derivatives Market

Short Squeeze, Positioning Turns Cautiously Bullish

Against the weakening risk sentiment, derivatives positioning has undergone a notable shift. The put/call ratio for options open interest has fallen to 0.56, the lowest level in 2026. The market currently holds roughly two call options for every put option. Options flow data confirms this trend: two weeks prior, during Bitcoin's second retest of lows, there was heavy buying of puts for hedging, causing the put/call volume ratio to spike. As call orders have flowed back in, this ratio has rapidly declined, even though spot prices have only partially recovered.

Perpetual swap funding rates also corroborate the shift in positioning. Average perpetual funding rates have remained well below the 0.01% equilibrium line, suggesting the market is far from crowded long territory. The derivatives market has apparently cleared short-side risks and, in the face of external bearish shocks, has transitioned to a cautiously bullish stance. This is the opposite of the crowded short positioning seen before the previous major sell-off.

Options Skew Still Prices Downside Risk

While overall positioning is leaning bullish, the options volatility surface offers a contrasting signal. The 25-delta skew, which measures the premium for downside protection relative to upside potential, has maintained a premium across all tenors. Every sell-off this year has pushed this premium higher. At the end of June, the metric surged to 24%, marking the most defensive sentiment for front-month contracts since the February sell-off. Even with the market's overall bias towards long positions, traders are still willing to pay a premium for downside hedging instruments.

Spot Price Deviates from Max Pain Point

Beyond positioning and skew, the relative position of the spot price to options market structure offers further clues. The current spot price is approximately 6% below the aggregate max pain point of $66,000. The max pain point is the strike price where the maximum number of open options contracts expires worthless. Prices often gravitate towards this level as expiration approaches.

This week's decline has widened the gap between spot and the max pain price, but the deviation is far less extreme than during the February sell-off, sitting merely in the middle of the 2026 trading range. Throughout the year, the max pain price has acted as a gravitational center for price action, with the spot price oscillating around it and rarely sustaining significant deviations. If the price can sustainably hold above $66,000, it would be a short-term bullish signal. Conversely, a further widening of the deviation would reinforce the defensive trading sentiment seen in the options market.

Cost of Crash Hedging Continues to Decline

While signals from the volatility skew and positioning structure diverge, the absolute cost of hedging downside risk provides a clear trend. Following the modest market rebound, the pricing of the put side of the 1-month volatility curve has shifted lower overall. The implied volatility for put options 5% below the spot price has decreased considerably. The lowest pricing points on the volatility curve are concentrated on far-dated call options.

Defensive sentiment persists in the market overall, but the absolute cost traders pay for downside hedging has noticeably decreased. The trend becomes clearer over a longer timeframe: the volatility premium driven by extreme put hedging demand during the February and June sell-offs has gradually faded entering July. The DVOL volatility index has fallen to its lowest point in 12 months. The market has entered a low volatility regime. While cautious sentiment still dominates the tape, the demand for hedging is gradually receding.

Summary

Synthesizing data from on-chain, off-chain, and derivatives markets paints a picture clearly characteristic of the late bear market phase.

On-chain data reveals a prolonged five-month period of deep undervaluation. Daily stop-loss realizations from long-term holders have surged to $280 million, indicating a significant redistribution of coins. However, a sustained decline in this stop-loss metric is a necessary prerequisite for an effective trend reversal.

Off-chain data shows that ETF outflows have narrowed from their June peak but remain negative on a monthly basis. Average daily trading volume is down 80% from the October 2025 peak, highlighting depressed institutional bullish conviction.

Derivatives positioning has shifted to cautiously bullish, with the put/call ratio hitting year-to-date lows. However, the volatility skew and options surface continue to price in downside risk.

Taking all indicators together, the fundamental conditions required for a market bottom are in place. However, the core signal confirming the bottom has not yet appeared. The subsequent trend reversal hinges on fulfilling three conditions: a sustained cooling of long-term holder stop-loss selling pressure, stabilization in institutional capital flows, and a decisive reclaim of the realized market price. Only upon these conditions being met would the probability of a transition to a bullish cycle significantly increase.