Glassnode: Crypto Market Enters Late-Stage Bottom-Building Phase

Original authors: CryptoVizArt, Frederik Theissen, Glassnode

Original compilation: Luffy, Foresight News

Bitcoin's price has remained below both the real market average and the short-term holder cost basis for five consecutive months, indicating a deeply undervalued range.

The proportion of long-term holder realized losses relative to total on-chain realized losses has risen to 43%, with a single-day peak of $280 million in realized losses—the highest level since December 2022. Outflows from spot ETFs have moderated but remain in monthly net outflow territory; daily average trading volume for ETFs continues to range between $650 million and $950 million, approximately 80% below the peak seen in October 2025, with institutional buying demand yet to stabilize.

Derivatives positioning has shifted to a cautiously bullish bias, with the put/call ratio falling to its lowest level since 2026; however, the options volatility surface still maintains a defensive risk premium, and spot prices remain significantly below the maximum pain level. The market has entered the late stage of base formation, with sustained selling pressure from long-term holders continuing to ease—key prerequisites for a market reversal and recovery.

Crude oil surges, pressuring risk assets across the board

Over the past seven trading days, WTI crude oil has risen cumulatively by 7.9%, with the majority of the gains concentrated recently, following reports that the U.S.-Iran memorandum of understanding has expired—a development that sent shockwaves through all asset markets. Bitcoin reached a weekly high gain of 9.4% but has since pulled back to a 5% weekly gain; the S&P 500 and the Euro Stoxx index have both turned negative, with European equities leading the decline in global risk assets. At this stage, Bitcoin’s price movement is highly correlated with that of risk assets.

Liquidity environment: Long-short tensions intensify

Amid external shocks from crude oil, the market’s liquidity environment has become fragmented. The U.S. broad money supply (M2) has risen to a record high of $22.8 trillion; historically, expansions in broad money have tended 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 strongly offset each other: while broad money continues to rise, quantitative tightening has not ceased, and real interest rates remain near 1%, keeping the opportunity cost of holding non-yielding digital assets high. The macroeconomic tailwind has not fully closed, but it has also not provided clear accommodative support.

A five-month period of deep undervaluation

Over the past week, Bitcoin rebounded from $58,300 to $64,400, showing short-term recovery; however, the price remains significantly below the true market average of $76,600 and the short-term holder cost line at $72,200. Only if the price reclaims these two key levels can the market exit its deeply undervalued range; otherwise, it remains vulnerable to downward pressure triggered by external negative catalysts.

The duration of this discount period is particularly noteworthy. Since early February 2026, the price has remained below both the active investor cost line and the breakeven point for recent entrants, lasting nearly five months—among the longest deep discount cycles in Bitcoin’s history.

Continuous turnover of positions during prolonged discount periods, with new capital accumulating below the cost basis of prior buyers and the overall market’s active holding level, has historically formed the foundation of major cycle bottoms, offering long-term allocation appeal for value investors. All indicators suggest the bottoming process is entering its later stage, but a pullback to $53,000 cannot be entirely ruled out.

Concentrated stop-losses by long-term holders with high positions

The market is forming a cycle bottom; the core issue now is identifying the primary source of downward selling pressure. The realized profit and loss ratio between long-term and short-term holders statistically measures the distribution of on-chain realized P&L across these two holder groups, clearly illustrating the proportional scale of profit and loss realization by each type of holder.

After the coin price fell below the true market average, the 30-day moving average of realized losses by long-term holders rose from 15% in early February 2026 to 43% today. The selling pressure from this group, driven by unrealized losses, has become the primary bearish force suppressing the coin price.

Most of these investors entered near the peak of the cycle, and after months of deep drawdowns, their confidence gradually eroded, leading them to exit en masse. This concentration of holdings directly explains why every rally faces heavy selling pressure from deeply underwater positions, preventing the price from consistently holding above the upper boundary of the current range.

No signs of weakening in stop-loss selling pressure yet

Loss-making long-term holders have become the primary downward pressure in the market; the next key indicator to watch is whether this selling pressure begins to subside.

The long-term holder realized loss metric (30-day smoothed moving average), which measures the loss amount generated by users holding for over 155 days, excludes internal transfers to accurately reflect genuine stop-loss exits. This metric recently hit a new daily peak, with daily realized losses reaching approximately $280 million—the highest since December 2022 and the second major wave of long-term holder stop-losses in this bear market.

The key difference is that after the first round of stop-loss peaks, selling pressure experienced a阶段性 decline, whereas this selling wave has not yet shown any signs of contraction. Only when this indicator shows a clear downward trend will the market have the foundational conditions to shift into a bull market. Over the coming weeks to months, the trajectory of this indicator will be the core signal for determining whether selling pressure has truly been fully absorbed.

ETF outflows have slowed, but the outflow trend has not reversed.

Shifting from on-chain to off-chain markets, spot ETF fund flows provide a clear reflection of institutional capital behavior. The 30-day moving average of ETF net flows illustrates the daily net inflow or outflow of capital into U.S. spot Bitcoin ETFs, filtering out daily volatility to reveal potential trends in institutional positioning.

Since mid-May 2026, the metric has entered a monthly net outflow phase, with a single-day outflow peak of $193 million in early June; it has since declined to a daily net outflow of $88.9 million. The slowing outflow size is a marginal positive, but monthly capital continues to drain from the market, and institutional buying demand has not stabilized. Only when capital flows consistently narrow into a balanced range can there be grounds to anticipate a short-term expansionary rally.

Institutional trading volume remains low.

In addition to net inflow data, the trading volume of U.S. spot ETFs can help gauge the extent of institutional confidence recovery. The 30-day moving average of daily ETF trading volume has been fluctuating between $650 million and $950 million, a level comparable to that of the fourth quarter of 2024, but approximately 80% lower than the $4.4 billion daily peak reached in October 2025.

Current trading volume only reflects modest institutional participation and remains extremely low compared to bull market peaks, indicating that ETF investors' long-term bullish confidence has not genuinely returned. Only when daily trading volume consistently increases alongside a sustained narrowing of net capital outflows—both signals occurring simultaneously—can we confirm a rebound in institutional demand. Until both sets of indicators improve together, off-chain data and on-chain metrics corroborate each other, confirming that the market remains firmly in a bearish phase.

Short position closed, stance shifted to cautiously bullish

Under weakening risk sentiment, the derivatives positioning structure has reversed. The put-to-call open interest ratio has dropped to 0.56, the lowest level of 2026, indicating that for every one put option, there are now two call options. Option trading volume corroborates this trend: when Bitcoin retested its low two weeks ago, the market aggressively bought put options for hedging, causing the put-to-call trading ratio to surge sharply; as bullish orders have steadily returned, the ratio has quickly declined—even though spot prices have only partially recovered their losses.

The perpetual contract funding rate further confirms the shift in positioning. The average perpetual contract funding rate has remained well below the 0.01% long-short equilibrium line for an extended period, far from the levels typical of a crowded long position. The derivatives market has already cleared out short-term risk, and overall sentiment has shifted cautiously bullish in response to external negative shocks—directly opposite to the heavily shorted positioning seen prior to the previous sharp decline.

The options surface continues to price in downside risk.

The overall position is net long, but the options volatility surface signals the opposite. The 25-delta volatility skew metric (the premium for downside protection relative to upside gain) remains at a premium across all contract maturities. Each market decline this year has pushed this premium higher, with the metric peaking at 24% at the end of June—the strongest downside protection sentiment in near-term contracts since the sharp drop in February. Even as the overall market position leans bullish, traders continue to pay a premium to buy downside hedging tools.

Spot price deviates from the maximum pain level

In addition to open interest and volatility skew, the relative position of the spot price to the options market structure provides further market insights. The current Bitcoin spot price is approximately 6% below the global maximum pain level of $66,000; the maximum pain level refers to the strike price at which the largest number of open contracts would expire worthless, and the price often tends to gravitate toward this level prior to expiration.

This week’s decline further widened the spread between the spot price and the maximum pain level, but the deviation remains far from the extreme levels seen during the February crash, currently sitting in the middle of the 2026 price range. Throughout the year, the maximum pain level has consistently acted as a gravitational center for price action, with spot prices oscillating around it and rarely experiencing prolonged or significant deviations. If the price holds steadily above $66,000, short-term market sentiment turns bullish; if the spread widens further, it will reinforce overall defensive trading sentiment in the options market.

Hedging costs for sharp declines continue to decline

There is divergence in volatility skew and positioning structure signals, but the absolute cost of hedging downside risk remains clear. As the market experiences a modest rebound, the put side of the one-month volatility curve has generally declined, with the implied volatility of put options at the 5% discount to the spot price dropping significantly; the lowest-priced points on the volatility curve are concentrated in the far-dated call options.

The overall market sentiment remains defensive, but the absolute cost paid by traders to hedge against declines has clearly decreased. Over a longer time horizon, this trend becomes even more evident: the volatility premium driven by extreme bearish hedging demand during the sharp declines in February and June has gradually dissipated since July. The DVOL volatility index has fallen to its 12-month low, signaling the market has entered a low-volatility range. While cautious sentiment still dominates, hedging demand is steadily waning.

Comprehensive analysis of on-chain, off-chain, and derivatives data clearly shows characteristics of the late stage of a bear market.

On-chain data shows that a five-month period of deep undervaluation has persisted, with long-term holders' single-day stop-loss liquidations rising to $280 million, indicating large-scale筹码换手 is underway; however, the sustained decline of this stop-loss indicator is a necessary precondition for a valid market reversal.

Regarding off-chain data, the scale of ETF outflows has narrowed since the June peak, but monthly net outflows continue; daily trading volume has dropped by 80% from the October 2025 peak, reflecting weak institutional bullish sentiment.

In the derivatives segment, market positioning has shifted to cautiously bullish, with the put/call ratio hitting its lowest level of the year; however, volatility skew and the options surface continue to price in downside risk.

Considering all indicators, the foundational conditions required for the market to bottom out are now in place, but the key signals confirming a bottom have yet to emerge. For the market to transition upward, three conditions must be met: sustained cooling of selling pressure from long-term holders, stabilization of institutional capital flows, and a durable price recovery above the true market average. Only then will the probability of a shift into a bull market cycle significantly increase.