After months of steady rise to record levels, the value of bitcoin The pulse has slowed, with BTC changing hands above $111,000 on Friday afternoon Hong Kong time, up 2% from the last week according to market data from CoinDesk.
The pullback from the recent peak above $126,000 is marked by momentum faltering below key cost basis levels, with capital moving out of the cash market and ETFs, along with defensive options positioning.
In a recent report, Glassnode frames repeated breakdowns below key quantiles as evidence of market exhaustion. At the same time, CryptoQuant, in a note shared with CoinDesk, finds similar stress in the reduction of realized profits and the depletion of currency inflows.
Both argue that capital remains in cryptocurrencies, but rotates from spot to derivatives, and volatility itself is now the main traded asset. Until that balance is restored, rallies are likely to fade rather than continue.
Glassnode points to the cost base for short-term holders of around $113,000 as the dividing line between renewed strength and deeper consolidation. Falling below that threshold, the company says, indicates that recent buyers are now racking up losses, eroding confidence and forcing weaker hands to capitulate.
Meanwhile, long-term holders have been selling heavily at a rate of over 22,000 BTC per day since July, a trend that continues to undermine momentum and weigh on any sustained recovery. If bitcoin fails to reclaim the $113,000 line, Glassnode warns that losses could deepen to the $108,000 to $97,000 range, where historically between 15% and 25% of the supply has become unprofitable.
CryptoQuant data reinforces that view from a flow perspective. ETF inflows have cooled after months of accumulation, while foreign exchange reserves are rising again, a sign that traders are preparing to sell into volatility rather than accumulate.
The firm characterizes this as a rotation of capital within cryptocurrencies rather than an outright outflow, as liquidity migrates into futures and options markets where volatility premiums have increased. This reflects the structural changes seen in 2021 and mid-2022, when speculative leverage replaced spot conviction.
Options data reflects a broader sense of caution. Glassnode reports record open interest as traders increasingly rely on derivatives to hedge rather than betting on the upside, with demand for puts rising across all expirations.
Glassnode notes that market maker hedging has tended to smooth out short-term price action, selling on rallies and buying on dips to keep delta (market) neutral. Elevated volatility and strong demand for put options are keeping the market stranded, with rallies limited by hedging flows rather than broad conviction.
This dynamic has left the market in limbo, where price action is determined more by risk management than directional conviction.
CryptoQuant interprets these flows as a sign of consolidation rather than collapse, writing that liquidity remains within the cryptocurrency ecosystem, rotating through different instruments as investors wait for clearer macro or political signals before committing new capital.
Both firms suggest that a meaningful recovery will require renewed spot demand and calmer derivatives activity, conditions that may depend on the timing of the Fed’s rate cut or a revival in ETF flows.
For now, Bitcoin is not collapsing so much as catching its breath, operating less like a revolution and more like a rotation. Volatility may still be the market’s favorite asset class, but sooner or later, even traders get tired of trading with fear.
