Glassnode On-Chain Data Reveals: Realized Price Average Lost, Bitcoin Enters "Bearish Time"

Original Article Title: Bears In Control

Original Article Authors: Chris Beamish, CryptoVizArt, Antoine Colpaert, Glassnode

Original Article Translation: AididiaoJP, Foresight News

Bitcoin spot trading volume remains low, with the 30-day average volume staying weak despite the price dropping from $98,000 to $72,000. This reflects inadequate market demand as selling pressure has not been effectively absorbed.

Key Insights

· Bitcoin has confirmed a breakdown, with price falling below the realized market value, shifting market sentiment to cautious defense.

· On-chain data shows initial accumulation signs in the $70,000 to $80,000 range, with a dense holding cost zone formed between $66,900 and $70,600, which could act as a short-term support level against selling pressure.

· Intensified investor loss selling has occurred, with more and more holders forced to exit through stop-loss orders as the price continues to decline.

· Spot trading volume remains weak, further indicating insufficient market support and a lack of effective absorption of selling pressure.

· The futures market has entered a forced deleveraging phase, with large-scale long liquidations exacerbating market volatility and downward pressure.

· Institutional inflows have significantly weakened, with ETF and related fund net inflows shrinking, unable to provide sustained buying support as seen in the previous uptrend phase.

· The options market continues to reflect high downside risk expectations, with implied volatility remaining high, an increase in demand for put options showing strong risk-off sentiment.

· With market leverage being cleared out and spot demand remaining weak, the price remains fragile, and any bounce could be merely a technical recovery rather than a trend reversal.

On-Chain Data Observations

Following last week's analysis pointing out the downside risk after the market failed to reclaim the $94,500 short-term holding cost, the price has now definitively fallen below the realized market value.

Breaking Below Key Support

The realized market value (average cost basis of active circulating holdings excluding long-term dormant coins) has repeatedly served as a key support level in this round of adjustment.

The breakdown of this support has confirmed the deterioration of the market structure since late November, with the current pattern resembling the phase transition from consolidation to deep correction seen at the beginning of 2022. Weak demand coupled with sustained selling pressure indicates that the market is in a fragile equilibrium.

Looking ahead, the price range is gradually narrowing. The upside resistance is around the $80,200 level of the realized market value, while the downside support is around $55,800 of the realized price, a level that has historically attracted long-term funds.

Potential Demand Zone Analysis

As the market structure resets, attention is turning to potential areas where a downward consolidation may occur. Several on-chain metrics help identify regions that could serve as interim bottoms:

The UTXO realized price distribution shows significant accumulation by new investors in the $70,000 to $80,000 range, indicating that there are funds willing to buy the dip in this area. Below this, there is a dense concentration zone between $66,900 and $70,600, which has historically acted as a short-term support zone.

Market Pressure Indicators

The realized loss indicator directly reflects investors' selling pressure. The current 7-day average realized loss has exceeded $1.26 billion per day, indicating an increase in panic selling after the market breached a key support level.

Historically, peak realized losses have occurred during the exhaustion phase of sell-offs. For example, during the recent bounce from $72,000, daily losses briefly exceeded $2.4 billion, with such extreme values often corresponding to short-term turning points.

Comparison with Historical Cycles

The relative unrealized loss indicator (unrealized losses as a percentage of total market cap) helps compare market pressures across different cycles. Extreme values during bear markets have often exceeded 30%, with the cycle bottoms in 2018 and 2022 reaching 65%-75%.

Currently, this indicator has risen above the long-term average (around 12%), indicating that investors whose cost basis is above the current price are under pressure. However, to reach historically extreme levels, a systemic risk event similar to the LUNA or FTX crashes would typically need to occur.

Market Dynamics

Spot and futures trading volumes remain low, while the options market continues to focus on downside protection.

Institutional Funds Shift to Net Outflow

As the price drops, the demand from major institutional investors has significantly weakened. Inflows into spot ETFs have slowed down, and funds related to corporations and governments are also decreasing, indicating a reduced willingness for incremental fund inflows.

This is in stark contrast to the previous uptrend phase, where continuous fund inflows provided support for price increases. The current shift in fund flows further confirms the lack of new fund inflows at the current price level.

Spot Trading Volume Remains Light

Despite the price dropping from $98,000 to $72,000, the 30-day average trading volume has not significantly increased. This indicates a lack of sufficient buying pressure during the downturn.

Historically, true trend reversals are often accompanied by a significant increase in spot trading volume. The current trading volume has only seen a slight recovery, indicating that market activity is still dominated by deleveraging and risk aversion rather than active buying.

Insufficient liquidity makes the market more sensitive to selling pressure, where even medium-sized sell-offs could trigger significant price declines.

Forced Liquidation in the Futures Market

The derivatives market has seen large-scale long liquidation, reaching the highest level since this round of decline began. This indicates that as the price drops, leveraged long positions are being forcibly cleared, exacerbating the downward momentum.

It is worth noting that the liquidation activity in November and December was relatively mild, indicating a gradual rebuilding of leverage. The recent surge signals the market entering a phase of forced deleveraging, where forced liquidation has become a major factor affecting prices.

Whether the price can stabilize in the future depends on whether the deleveraging process is sufficient. A true recovery requires spot buyers to step in; relying solely on position liquidation is unlikely to result in a sustained rebound.

High Short-Term Volatility Persists

When the price tests the previous high of $73,000 (now turned support), the short-term implied volatility rises to around 70%. In the past week, the volatility level has increased by about 20 volatility points compared to two weeks ago, with the entire volatility curve shifting upwards.

Short-term implied volatility continues to exceed recent actual volatility, indicating that investors are willing to pay a premium for short-term protection. This repricing is especially evident in near-term contracts, showing that risk is concentrated there.

This more so reflects the demand for protection against sudden downturns rather than a clear directional bias. Traders are reluctant to sell a large amount of short-term options, keeping the cost of downside protection elevated.

Increasing Demand for Put Options

The repricing of volatility is showing clear directional characteristics. The skewness between put options and call options has widened again, indicating that the market is more focused on downward risk rather than upside potential.

Even with the price holding above $73,000, option funding remains concentrated on protective positions, leading to a negatively skewed implied volatility distribution that reinforces the market's defensive tone.

Volatility Risk Premium Turns Negative

The 1-week volatility risk premium has turned negative for the first time since early December, currently around -5 compared to around +23 a month ago.

A negative risk premium means that implied volatility is lower than actual volatility. For option sellers, this means that time decay gains turn into losses, forcing them to hedge more frequently, thereby increasing short-term market pressure.

In this environment, option trading no longer serves to stabilize the market and may instead exacerbate price swings.

$75,000 Put Option Premium Variation

The $75,000 strike price put option has become a market focus as this level has been repeatedly tested. The net buying premium for put options has increased significantly, progressing in three stages, each time synchronized with price declines lacking effective rebounds.

On longer-term options (beyond 3 months), the situation is different: the selling premium has started to exceed the buying premium, indicating traders' willingness to sell high volatility on forward contracts while continuing to pay a premium for short-term protection.

Summary

After failing to reclaim the key level of $94,500, Bitcoin fell below the real market mean of $80,200, entering a defensive state. As the price dropped to the $70,000 range, unrealized profits contracted, and realized losses increased. While there are initial signs of accumulation in the $70,000-$80,000 range and a dense concentration zone formed in the $66,900-$70,600 region, the ongoing loss-induced selling indicates continued market caution.

In the derivatives market, the selling pressure has shown disorderly characteristics, with large-scale long liquidations confirming a leverage reset process. Although this helps clear speculative froth, it is not sufficient to form a solid bottom. The options market reflects increased uncertainty, with rising demand for put options and high volatility, signaling that investors are preparing for further volatility.

The key to future price action still lies in spot demand. Without seeing an increase in spot participation and continuous capital inflows, the market will continue to face downward pressure, and any rebound may lack sustainability. Until there is an improvement in the fundamentals, the risk remains tilted to the downside, and a true recovery will require time, significant reshuffling of ownership, and substantial buyer confidence.

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