The Bitcoin market is currently undergoing a deep structural change at its bottom formation. On-chain data indicates that the capitulation-style selling by long-term holders has significantly cooled off, and strong buying pressure has successfully absorbed the lows formed in late June. Cryptocurrency analytics firm Glassnode points out that the core driver of the current market is shifting from pure risk appetite to a sensitive reaction to U.S. dollar liquidity, and Bitcoin appears to be attempting to break free from the toughest phase of the bear market. Although macro uncertainties persist, the initial signs of selling exhaustion provide a foundation for price rebalancing against a backdrop of a weakening U.S. dollar.
The latest market reactions reveal a subtle loosening in the correlation between Bitcoin and risk assets such as U.S. equities. Following the release of moderate inflation data this week, Bitcoin’s upside far outpaced major stock indices, marking the most positive response to macro bullish news in several weeks. Notably, although the U.S. 10-year real yield has risen to near 2026 highs and the U.S. dollar index has remained above its 200-day moving average since May, broader risk assets such as U.S. and European equities continue to trade near elevated levels, while credit spreads and volatility indicators remain subdued. This divergence suggests that Bitcoin is no longer merely a proxy trading vehicle for equities, but has instead formed a deeper inverse correlation with dollar movements. After consolidating sideways at lower levels over the past month, the market’s sensitivity to positive news has increased markedly, which often signals exhaustion on the sell side, with buyers merely awaiting a reason to enter.
From the perspective of on-chain cost structure analysis, Bitcoin’s price currently resides within a well-defined range. According to data compiled by Woofun AI, the price has climbed above the Realized Price of all network participants, which serves as a classic bottom support line in bear markets. At the same time, however, the price remains below the average cost basis of short-term holders (approximately $69,000), a level that represents the breakeven point for buyers over the past five months. Key indicators show that the previous dominance of sell pressure driven by long-term holder profit-taking has nearly dried up, and veteran investors are now largely selling at a loss. The entity-adjusted realized loss indicator for long-term holders peaked two weeks ago and has since begun to decline. Meanwhile, during the June lows, broad-based buying activity occurred across the spectrum from retail investors to large wallets. Therefore, the first test of the critical $69,000 breakeven level is expected to trigger a strong reaction. A successful reclaim of this level would open the door for a rebound, while a failed assault would imply a continuation of range-bound consolidation.
Institutional capital and the derivatives market are transmitting signals that are not entirely aligned. Although redemption pressure on U.S. spot Bitcoin ETFs has notably subsided from the extreme levels seen in June, one day this week still recorded the largest single-day outflow in several weeks, followed by partial replenishment, indicating that the market remains in a phase where institutions have halted selling but have not yet turned actively to buying. In contrast, the derivatives market has shown positive changes, with the options put/call ratio dropping to year-to-date lows, as bearish protection is being unwound by traders; perpetual swap funding rates also sit only slightly above neutral, far from crowded long positions. However, a key cautionary note is that this exit from bearish bets has not translated into actual spot buying, as position adjustments in futures and options markets do not equate to real money flowing into the market.
The metric measuring the premium for crash protection in the options market has continued to decline following the June sell-off and now sits well below the extreme levels seen in February. Bitcoin’s price is challenging the “Max Pain” level for the first time in several weeks, and historically, reclaiming this level has coincided with improvements in the market environment. At the same time, the Bitcoin volatility index (DVOL) is approaching one-year lows, and such compression tends to be unsustainable, often serving as a precursor to a new trend move. In summary, although the bottom foundation has been preliminarily established—capitulation by long-term holders cooling, lows absorbed by buying, and positive macro reactions—the confirmation signal for a reversal has not yet arrived. ETF outflows, while slowing, have not reversed; derivative unwinding lacks spot follow-through; and the market stands at a crossroads between range-bound consolidation and trend breakout, awaiting the next decisive catalyst to emerge.
