Bitcoin (BTC) price consolidation near $89,000 has left more than one-fifth of circulating supply held at a loss, with on-chain metrics showing market conditions comparable to early bear market phases in 2018 and 2022.
Glassnode's January 28 analysis identified key support at $83,400, representing the lower bound of the Short-Term Holder Cost Basis model.
The blockchain analytics firm noted that failure to hold this level could trigger deeper correction toward $80,700.
The current supply distribution reveals 22% of all Bitcoin held at unrealized losses, a threshold last observed during Q1 2022 and Q2 2018. Both periods preceded extended bearish phases as long-term holders faced mounting pressure to realize losses.
What the Data Shows
Short-term holders currently maintain only 19.5% of their supply underwater, well below the 55% neutral threshold that typically precedes capitulation events. However, on-chain liquidity remains insufficient to fuel sustained rallies.
The Realized Profit/Loss Ratio 90-day moving average trades below 5, a level historically required for mid-cycle recoveries. Previous bull market phases in 2024 required this metric to rise and hold above that threshold before price expansion occurred.
US spot Bitcoin ETF flows stabilized after sustained outflows, with the 30-day moving average hovering near zero. The cooling sell pressure contrasts with aggressive accumulation waves seen in early 2024 and late 2024.
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Why Markets Turned Defensive
Options markets reflect growing caution across time horizons. The 25 delta skew turned bearish across all maturities, indicating increased demand for downside protection versus call options.
Dealer gamma exposure shifted negative from $90,000 down to the mid-$70,000 range, creating conditions where dealer hedging mechanically reinforces downward price movements. Short-dated implied volatility repriced sharply over the weekend, driven by geopolitical uncertainty rather than crypto-specific stress.
Perpetual futures funding rates remained largely neutral despite elevated price volatility, suggesting leverage has been washed out and positioning is balanced. Spot cumulative volume delta bias improved across major venues, led by Binance recovery from deeply negative territory.
The divergence between improving spot flows and defensive options positioning creates a market dependent on sustained demand follow-through. Short-term put premium bought exceeded premium sold for near-term expiries, while longer-dated protection was net sold.
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