As Bitcoin (BTC) price undergoes adjustments around $89,000, more than one-fifth of the circulating supply is held at a loss. On-chain indicators suggest that the current market environment is similar to the early stages of bear markets in 2018 and 2022.
Glassnode's analysis published on January 28 identified $83,400, corresponding to the lower end of the short-term holder average cost basis model, as a key support zone.
This on-chain analytics firm pointed out that if this level is not maintained, the adjustment could widen and fall to around $87,000.
Current supply distribution shows that 22% of the total Bitcoin supply is in an unrealized loss state, a level not seen since Q1 2022 and Q2 2018. In both periods, long-term holders faced realization pressure, leading up to extended bearish markets.
What the data shows
Short-term holders currently have only 19.5% of their holdings in losing territory, which is significantly lower than the neutral baseline of 55% typically seen before capitulation. However, on-chain liquidity remains insufficient, suggesting a struggle to support a sustained rally.
The Realized Profit/Loss Ratio 90-day moving average is moving below 5, a level historically considered the minimum requirement for mid-cycle recovery. Even in the bullish phase of 2024, this indicator must break and maintain above 5 before prices can begin to expand significantly.
The U.S. spot Bitcoin ETF fund flows have stabilized after a prolonged period of net outflows, currently hovering around almost 0 based on a 30-day moving average. This easing of selling pressure contrasts with the aggressive buying and accumulation phases observed in early and late 2024.
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Reasons for the market's defensive shift
The options market reflects an increasingly cautious sentiment across the expiration period. The 25-delta skew has turned bearish (favoring put options) across the entire expiration, suggesting a growing demand for hedging against downside risks compared to call options.
Dealer gamma exposure has shifted to negative in the range of $70,000 to $90,000, creating an environment where dealer hedge activities mechanically increase selling pressure. Short-term option implied volatility was sharply reassessed over the weekend, largely triggered by geopolitical uncertainty rather than cryptocurrency-specific issues.
The funding rate for perpetual futures remains largely neutral despite high price volatility, indicating that excessive leverage has largely been unwound and positions have regained balance. Cumulative volume delta (CVD) bias has improved across major exchanges, with Binance leading the recovery from deep negative territory.
The discrepancy between improving spot fund flows and defensive option positioning creates a structure where the market heavily relies on additional demand inflows. In the short expiration period, the net purchased put option premium exceeded the net sold premium, while protective positions for longer expiration periods showed a net selling advantage.
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