Bitcoin dropped to near $60K as losses intensified and recent purchasers faced increased strain. Nevertheless, enhanced liquidity, stronger passive bids, and steadfast ETF holders indicate that the market might be forming a base.
Executive Summary
- Bitcoin is trading at a 15% discount to its True Market Mean of $77.2k, confirming that the on-chain regime remains firmly in bear market territory despite the post-ceasefire rebound and the unwinding of the geopolitical risk premium.
- The Short-Term Holder MVRV has risen from 0.81 to 0.90 but stays below the 1.0 breakeven level, with the 30-day moving average of the Realized Profit/Loss Ratio at 0.53 indicating that losses continue to dominate capital flows.
- The Realized Cap has decreased by 1.45% over 90 days to $1.07T, although the 7-day change has almost halted at -0.18%. A return to positive 90-day growth coupled with a recapture of the True Market Mean are the key conditions for a credible pre-bull transition.
- Spot liquidity conditions have improved as passive bids reappeared following Bitcoin’s drop towards $60K, lessening the dependence on aggressive buyers and suggesting sell-side pressure is being absorbed more effectively.
- Open interest remains subdued, but significant passive bids continue to absorb supply while aggressive selling diminishes, pointing to a more patient buyer base beginning to support the market around current levels.
- Implied volatility has sharply normalized, while realized volatility continued to increase, pushing the volatility risk premium into negative territory.
- Skew has retreated from its recent extremes, indicating that demand for downside protection has substantially eased.
- Options flow has become more balanced, although dealer positioning remains concentrated around the $68K negative gamma zone.
Macro Insight
Bitcoin’s drawdown in May-June was a consequence of a war premium. During the first three weeks, BTC depreciated by approximately 22%, from $77,486 to a low of $60,861, while WTI crude oil maintained levels above $90 and gold saw a safe-haven bid. This represented a classic geopolitical-stagflationary pattern.
The US-Iran peace deal, announced on June 14, fundamentally altered this dynamic within a single 48-hour period. Crude oil prices plummeted from $86 to $76, and gold’s safe-haven premium dissipated. Bitcoin consolidated its recovery, returning to the $65-66k corridor it had lost during the decline.
The movement in crude oil, in percentage terms, significantly outweighs the others, and this is the key takeaway. The energy and geopolitical premium that suppressed risk assets for three weeks has been removed. Gold is the only one of the three assets trading near its starting point. Both BTC and oil are positioned at the lower end of their pre-shock ranges, albeit for different reasons: oil is repricing based on a genuine demand outlook, while BTC is repricing the absence of a headwind.
As the geopolitical risk premium unwinds, the conditions that directed capital towards safe havens and away from risk assets are diminishing. Historically, such a rotation has been supportive for BTC.
On-chain Insight
Below the Market Mean
With the geopolitical risk premium now unwinding following the US-Iran peace accord and the subsequent collapse in crude oil from $86 to $76, the macroeconomic headwinds that compressed risk assets in recent weeks are subsiding. This environment presents an opportunity to re-evaluate Bitcoin’s position within its cyclical progression, assuming the structural patterns observed in prior cycles persist. The most distinct demarcation between a structural bull and bear market is achieved by comparing the spot price to the cost basis of the active investor base. The True Market Mean reflects the average acquisition price of actively traded coins and historically acts as the threshold between bear and bull market regimes.
Currently standing at $77.2k, the True Market Mean is approximately 15% above the spot price of around $65.6k, firmly placing the market in discount territory. During the mid-May peak, the price briefly neared this level before the subsequent correction significantly widened the divergence. Despite the recent rebound, the on-chain regime has remained decidedly bearish, and any rapid recapture of the True Market Mean would serve as the trigger to revise the broader outlook from bearish towards a potential pre-bull transition.
Recent Buyers Still Underwater
Given that the broader regime is confirmed as bearish due to the persistent discount to the True Market Mean, the subsequent inquiry concerns the performance of recent market entrants during the current bounce from the early June low. The Short-Term Holder MVRV metric gauges the aggregate unrealized profit or loss for coins transacted within the past 155 days, with a value of 1.0 representing the cohort’s collective breakeven point.
Last week’s report indicated this metric at 0.83, signifying that the newest buyers were significantly in the red. As the price has risen from its low, it has since recovered to 0.90, yet it remains below the crucial 1.0 threshold. The implied cost basis for this cohort is approximately $72.6k, leaving recent buyers with an average loss of around 10%.
While the recent rally has provided some relief, it has not been substantial enough to return this cohort to net profitability, which is a prerequisite for any sustained departure from bear market conditions. The improvement from 0.81 to 0.90 alleviates some pressure among recent buyers but does not resolve their position, and until STH MVRV surpasses 1.0, this cohort will continue to represent a source of overhead supply during any recovery attempts.
Losses Still Dominate Flow
Further substantiating the bearish regime assessment and the recent rally’s insufficiency in pushing STH MVRV back above breakeven, the overall trend in market profitability reinforces the same conclusion. The Realized Profit/Loss Ratio contrasts the dollar value of coins transacted in profit against those moved at a loss, with readings exceeding 1 indicating profit-taking dominance and readings below 1 reflecting loss realization as the prevailing activity.
The 90-day simple moving average (SMA) of this ratio stands at 1.10, significantly below its four-year average and only marginally above the neutral 1.0 mark, suggesting the broader market has been hovering near indecision on a quarterly smoothed basis. The 30-day SMA presents a more definitive picture at 0.53, confirming that loss realization has consistently outpaced profit-taking over the majority of the past month.
A 90-day SMA remaining near 1.0 while the 30-day SMA registers 0.53 represents a capital flow configuration that strongly confirms bearish conditions. A sustained recovery of both SMA trends towards the bull market range above 2 would be the initial meaningful indication that the underlying trend is shifting.
Capital Quietly Leaving
Assessing the market’s profitability bias through the Realized Profit/Loss Ratio represents only half of the flow picture; magnitude completes it. The Realized Cap quantifies the aggregate cost basis of all coins in circulation, increasing when capital enters the network and decreasing when it exits. The Realized Cap currently stands at $1.07T and has contracted by 1.45% over the past 90 days, with the 30-day change at -1.39%, indicating a steady outflow of capital on a cycle scale rather than a singular acute shock. The tentative positive sign from the recent rebound is the 7-day change at -0.18%, where the outflow has nearly stabilized. The contraction of the Realized Cap on a cycle scale corroborates the bearish assessment derived from the valuation and flow layers above, positioning the market in what can be described as a deep bear market where both valuation discount and capital flow trajectory are in alignment.
The conditions necessary to consider a credible transition to a pre-bull phase are specific and quantifiable: a recapture of the True Market Mean near $77.2k, Short-Term Holder MVRV re-establishing levels above 1.0, and the Realized Cap turning positive over a 90-day period.
Off-chain Insight
Spot Liquidity Turns Supportive
Following Bitcoin’s descent towards the $60K mark, conditions within spot markets have started to improve. The Binance Spot Orderbook Depth Imbalance has decisively shifted towards bids, with buy-side liquidity now exceeding resting sell orders by the widest margin observed in recent months.
This suggests that market participants are increasingly positioning themselves to absorb supply at lower price points rather than offering liquidity during upticks. While orderbook liquidity is inherently fluid and can be withdrawn rapidly, the recent shift signifies a notable change from the sell-side dominance that characterized much of the recent downturn.
Historically, sustained bid-side superiority has often coincided with periods of market stabilization, as deeper buy walls provide underlying support for prices and enhance the market’s capacity to absorb further selling pressure. Although this factor alone is insufficient to confirm a durable bottom, the emergence of substantial buy-side depth indicates that spot market participants are becoming more inclined to defend current price levels.
Patient Bid, No Aggression
Open Interest hovered near the upper boundary of its recent range throughout late May, facilitating the advance to local highs. When the price declined in early June, both Spot CVD and Futures CVD trended downwards concurrently, indicating a decline driven by actual capital rather than a one-sided liquidation of leveraged longs. Subsequently, Open Interest compressed sharply from its peak, confirming a genuine deleveraging event. Funding rates fell from firmly positive territory into a band oscillating around zero, signifying neither a crowded long premium nor an aggressive short bias.
Since this downturn, Open Interest has seen minimal increase; therefore, the modest rise in Futures CVD reflects only marginal leveraged demand. Spot CVD has not mirrored this trend, drifting flat or lower. However, this pattern appears to be characteristic of the resting limit bid previously discussed. Passive orders absorbing supply below the bid-ask spread can cause Spot CVD to trend downwards even as coins are removed from the market, and a consistently replenished bid can sustain this pattern. This accumulation process is quiet and lacks assertiveness. A sustained upward trend in Spot CVD would signal that genuine buyers are becoming eager to enter the market rapidly rather than patiently waiting at the bid. If this were to coincide with the currently subdued futures indicators turning upwards, it would represent a constructive setup with both flow regimes aligned towards the upside.
Implied Volatility Continues to Normalize
Beginning with implied volatility, the sharp repricing event triggered by Bitcoin’s breach of its multi-month range is continuing to unwind as the spot price stabilizes around 65K and recovers from the June lows.
The short-term maturities experienced the most significant adjustment. One-week at-the-money implied volatility decreased from peaks exceeding 65% to approximately 35%, while the one-month tenor dropped from roughly 50% to 35%. Longer-dated maturities saw more moderate easing, with the six-month tenor declining from around 44% to 41%.
This reduction reflects a market that has grown increasingly comfortable with current price conditions. Despite Bitcoin’s rebound from the June low near 59K to almost 67K, the demand for optionality has continued to decline across all maturities, as traders unwind the protection premium that was priced in during the recent selloff.
The volatility shock has been largely absorbed, with options markets steadily removing the premium that was factored in during the recent period of stress.
Volatility Risk Premium Turns Negative
Following the normalization of implied volatility, the relationship between implied and realized volatility has undergone a significant shift over the past week.
One-month implied volatility has declined from approximately 47% to 35%, while realized volatility has continued to climb, increasing from roughly 27% to 42%. Consequently, the volatility risk premium has compressed sharply, moving from a double-digit premium in early June into negative territory.
The accompanying chart illustrates that the volatility premium established during the selloff has steadily unwound. As implied volatility normalized and the recent market turbulence contributed to an increase in realized volatility, the spread compressed and eventually turned negative.
With realized volatility now surpassing implied volatility, the relationship between these two measures has completely reversed from the conditions observed earlier this month.
The volatility risk premium has turned negative, suggesting that options markets now anticipate a calmer environment than recent price action might indicate.
25 Delta Skew Normalizes After Protection Rush
Following the reversal in the volatility risk premium, skew offers insight into how the demand for directional protection has evolved since the selloff.
Since skew is calculated as the difference between put volatility and call volatility, positive readings indicate that puts are trading at a premium relative to equivalent calls. Earlier this month, downside protection became considerably more expensive, with the one-week skew briefly approaching 30% and the one-month tenor rising above 24% as traders rushed to hedge against the breakdown towards the June lows.
That demand has since subsided. The one-week skew has retreated towards 13%, while the one-month tenor has decreased to approximately 14%. Longer-dated maturities have also normalized, with the three-month and six-month tenors now trading near 13% and 11%, respectively.
Protection demand remains elevated compared to pre-selloff levels, but the rapid surge for downside hedging has largely abated as market conditions stabilize.
Gamma Exposure Concentrates Above Current Spot
Beyond pricing and sentiment analysis, gamma exposure helps identify the strike levels where dealer hedging activities are most likely to influence market dynamics.
Recent options flow has become more balanced. Over the past seven days, put buying accounted for the largest portion of premium traded at 28.1%, closely followed by call buying at 24.1%. In the last 24 hours, call buying has slightly surpassed put buying.
This evolution is reflected in the gamma profile. The most significant cluster of negative gamma is now situated at the 68K strike level, with additional short gamma exposure extending from 66K to 71K. With Bitcoin currently trading near 65K, the spot price remains just below the primary concentration of short gamma. Positive gamma exposure is located at much higher levels, in the high 70s, leaving Bitcoin far from the nearest area of stabilizing dealer positioning.
As protection demand normalizes, dealer positioning remains concentrated above the current spot price, with the largest negative gamma zone centered around 68K.
Conclusion
Bitcoin remains in a corrective phase, but the market’s character is beginning to shift. While profitability has diminished, realized losses have accelerated, and recent buyers are still under pressure, several indicators suggest the market is transitioning from forced selling towards stabilization.
Liquidity conditions are improving, spot order books are being rebuilt, and passive buyers are showing increased activity. Concurrently, ETF holders continue to demonstrate relatively strong conviction, extending their holding periods rather than aggressively reducing exposure. Options markets maintain a cautious stance, with demand for downside protection still present, but volatility expectations have eased from recent extremes.
The outcome is a market that remains fragile, yet increasingly supported by patient capital. Whether Bitcoin can establish a durable floor around current levels will likely hinge on whether improving liquidity and selective accumulation can counteract the ongoing weakness in profitability and broader risk sentiment.
Original article : insights.glassnode.com