Bitcoin's "Bounce Back" Is Over, Officially Entering Late-Stage Bear Market?

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, after encountering 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 the midpoint between the realized price and the true market mean. The short-term holder cost basis fell 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 plunged from a local high of 3.16 to 0.29, almost identical to the panic wave in February; 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 coming from long-term holders capitulating at cycle top levels, indicating that the supply redistribution process is accelerating but not yet complete.
• Bitcoin was rejected almost precisely at the aggregate US spot ETF cost basis of around $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, indicating that sellers continue to dominate the order book despite the pullback.
• Implied volatility continues to compress, while the volatility risk premium widens, with the options market pricing in higher future volatility than recent actual market performance.
• Skew remains in put premium territory, but the recent sell-off has not triggered a notable increase in downside hedging demand.
• Market maker positioning is concentrated around the current spot price; Bitcoin is in the largest negative gamma zone, with capital flows consistently 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 over a 50% probability of a Fed rate hike by year-end and no more rate cuts expected for the full year. The US dollar index held above 99. Financial conditions are tightening marginally, not easing.

Bitcoin absorbed this shift more intensely than any other risk asset, 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 of 2026. Institutions are de-risking as prices decline, rather than reacting after the fact. Friday's non-farm payroll 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

Back in Bear Market Territory

The aforementioned macro headwinds have directly translated into a deterioration of on-chain structure. The 13% decline over the past week pulled the price back from the true market mean of $77.8k, which tracks the cost basis of actively traded supply and historically serves as the dividing line between bull and bear markets. The current price of $67k sits in the middle of this range. Failing to hold above the true market mean reaffirms that 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, a structure last seen 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 duration of the downturn begins to pressure investor conviction, historically making structural failure or large-scale capitulation more likely at this stage.

Profitability Collapses Amid Decline

On top of 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 overwhelmingly dominating on-chain spending behavior. This aligns almost perfectly with the panic wave in early February. On May 7, this 7-day MA spiked to 3.16 as investors took profits during the $82k rally, but the 90-day MA never broke the threshold of 2, which corresponds to genuine bull market capital flows. This divergence between short-term and medium- to long-term readings is a clear signal of a rally lacking structural conviction, consistent with a local top in a bear market rather than a credible structural shift. The subsequent fall to 0.29 further confirms this assessment.

New Buyers Under Pressure

Resistance at the bear market top zone has directly exposed recently accumulated supply to losses. 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 emerge.

With the price pulling back to around $67k, it is approaching the lower edge of the supply cluster accumulated since February. In this zone, a large number of short-term holders are watching their unrealized gains shrink to breakeven or turn into losses. Those who accumulated near the $78k-$82k local top are facing the most direct pressure. Whether they choose to hold or capitulate will determine whether the current price level can absorb selling pressure or give way to a deeper decline.

Accelerating Loss Realization Across Groups

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

Of this, $770 million per day is realized by long-term holders who bought before January 2026, reflecting the continued capitulation of cycle top buyers as the bear market lengthens. The remainder comes from recent buyers who accumulated within the $67k-$82k range during 2026 and are being forced to exit 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 new buyers at lower prices is a recurring and necessary feature of the cyclical bottoming process. However, the current pace of loss realization suggests this process is not yet complete.

Off-Chain Insights

Breaking Below ETF Cost Basis

The latest Bitcoin rally stalled almost precisely at the aggregate US spot ETF cost basis of $83k, transforming a level that previously acted as support into clear resistance. This suggests that many ETF investors who were 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 this cycle. When the price struggles to reclaim the average holder's cost basis, it often means 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 profit and could improve sentiment for this group. 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 Vanishes

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 makes the current move particularly notable is that it follows a period of sustained spot-led accumulation in April and early May. During that rally, buyers continuously absorbed selling pressure, pushing spot volume delta into positive territory and helping Bitcoin recover from the mid-$60k range to $80k. That demand pulse has now faded, and with prices failing to break higher, sellers have regained control.

A persistently negative spot volume delta is typically accompanied by 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 meaningful improvement in spot demand remains one of the key signals for a sustainable recovery.

Futures Liquidations

The latest 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 was still smaller than during the corrections in October 2025 and February 2026, suggesting that leverage was not excessively stretched heading into this decline. Historically, large long liquidation events often coincide with local exhaustion points, as forced selling cascades through the derivatives market and flushes 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 alongside a return of spot buyers, 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 compression across the entire term structure. The 1-month tenor has fallen from around 38% to 34%, while the 3-month and 6-month tenors have also compressed by about 3 volatility points over the past two weeks.

This movement reflects the market's reluctance to pay a premium for options even after Bitcoin broke below its recent range. While front-end volatility showed brief reactions during sharp spot price moves, 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 suggests that traders continue to view the recent price weakness as a local event rather than a catalyst for a broader volatility repricing.

Volatility sellers remain dominant, and despite the price weakening, demand for protection has not accelerated.

Volatility Risk Premium Near Three-Month High

As implied volatility falls, the relationship between implied and realized volatility tells a different story. Although Bitcoin has experienced a period of volatility, the options market continues to price in significantly more future volatility than what spot has actually delivered recently.

1-month implied volatility has rebounded to around 42%, while realized volatility remains near 32%. The result is that the volatility risk premium has widened to levels close to its highest in the past three months.

This shift has been particularly evident during the recent sell-off. While realized volatility picked up as spot broke key support levels, implied volatility rose 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 would suggest, keeping the volatility premium at notably elevated levels.

Put Premiums Remain Elevated

As the volatility risk premium widens, skew shows where traders continue to focus their options demand. Despite the spot breakdown, puts remain persistently 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 basis of around $83k indicates that many investors are still trapped above the current price, creating selling pressure on rallies and continually suppressing Bitcoin's recovery.

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

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