1. Bitcoin drops below major cost-basis levels as weak spot demand and ETF outflows weigh on the market.
2. Derivatives activity stays quiet while volatility rises and traders move toward downside protection.
3. On-chain signals highlighted by Glassnode’s James Check show increasing market fragility.

Bitcoin has entered a sharper correction phase after breaking below several important cost-basis markers, reflecting fading spot demand and steady US spot ETF outflows.

According to Glassnode, BTC fell under the earlier consolidation band at $97,000 and briefly reached $89,000, turning its year-to-date performance negative. This deeper contraction extends last week’s mild bearish trend and raises questions about where buyers may return as the market searches for stability.

Spot demand has not shown the strength needed to counter this decline. ETF flows remain negative on a seven-day basis, signalling that institutional allocators prefer staying on the sidelines during the pullback. With this major buyer cohort absent, Bitcoin continues drifting toward deeper on-chain support zones held by long-term and short-term investors.

Bitcoin Short-Term Holder Bands Signal Growing Market Stress

There is mounting pressure indicated on-chain. Once it dropped below the price of $97,000, Bitcoin dropped further to the short-term holder’s lower band of about $95,400. Almost all recent purchasers are in the red with the short-term holder cost basis now almost at $109,500.

According to Glassnode, the seven-day EMA of the realized losses of these short-term holders has now reached its highest point of $523 million per day since the FTX crash. This implies that the number of buyers between $106,000 and $118,000 would be clumped, generating a bigger pool of stagnant supply.

The market will have to take in the distressed selling or enter into a prolonged period of consolidation before it stabilizes. The other significant defence area is close to the Realized Price of the Active Investors at the price of $88,600.

A loss of less than this point would be the first step of the active-investor cost basis of this cycle, indicating that bearish momentum is taking over. The number of BTC now underwater is about 6.3 million, primarily in a rather gentle drawdown of -10% to -23.6%.

This pattern is similar to the cooling period at the beginning of 2022, instead of deep capitulation at the end of 2022 and the first quarter of 2023. This puts the $88,600-$82,000 band, the line separating a mildly bearish period and a period of a more serious decline.

Derivatives Stay Quiet as Volatility Rises

Traders unwind exposure in derivatives. The open interest of futures continues to decline, and the funding rates of the major assets are at the bottom of the cyclic levels, indicating less enthusiasm for leverage. Instead of combining vulnerability with risk, traders are retreating.

In the options market, the implied volatility increased abruptly following the drop of Bitcoin below $90,000. Volatility increased most in the short term, and traders purchased lots of downside protection, causing the premiums on the puts to increase and the stronger premium at the higher $90,000 strike.

The DVOL index has also been moving back to highs of each month around 50, indicating that traders are optimistic that there will be more volatility in the price movements in the near future.

Also Read: Bitcoin Price Outlook: $125K Target Unlikely for 2025 Rally