Bitcoin (BTC USD) Price Shows Signs of Recovery Despite Negative Retail Demand

Bitcoin (BTC USD) whales accumulated over 16,000 BTC in seven days while retail demand turned negative at -5.7% amid a backdrop of tight liquidity and peak signs.

The whale pattern mirrored early August dynamics when larger investors bought price dips while smaller investors sold at losses.

CryptoQuant analyst Caueconomy identified this behavior as classic “buy the dip” absorption during Bitcoin’s price decline.

That said, at the time of writing, Bitcoin (BTC USD) price was seen on path to recovery as it recorded 2h-hour gains of 3.9%, trading near $116K.

Until earlier today though, retail demand had reached -5.7% as individual investors continued their exodus from crypto markets.

CryptoQuant analyst Maartunn described retail participants as “tourists of the crypto market here for the hype, gone when it fades.”

The retail departure occurred alongside mounting institutional selling pressure. Bitcoin exchange-traded funds (ETFs) recorded outflows of up to 4,200 BTC.

At the same time, Ethereum ETFs saw massive 111,000 ETH outflows, amplifying broader risk-off sentiment across digital asset markets.

On-chain data during the consolidation phase leaves the door open for different scenarios, including a near-peak reality.

Bitcoin (BTC USD) After All-Time High: Recovery Follows Consolidation?

Bitcoin surged past $120,000 resistance to reach a new all-time high of $123,640 last week before momentum stalled. As of press time, BTC was trading at $116,825.25.

Bitfinex Alpha report noted that the last week’s rally had quickly fizzled due to a lack of macroeconomic catalysts, resulting in a sharp peak-to-trough pullback that dragged BTC back toward local range lows.

Higher-than-expected consumer and producer price inflation prints in the US reduced risk appetite for BTC, with caution spreading across asset classes.

The market entered a firm consolidation phase as investors adopted a wait-and-watch stance while weighing upcoming macro catalysts.

Capital inflows showed signs of fatigue even as Bitcoin set new highs. The realized cap increased by only 6% per month during the current environment, substantially lower than the 13% monthly rate seen during the initial $100,000 breakout in late 2024.

This softer capital inflow period highlighted notably lighter demand appetite from investors at elevated price levels.

Now, after all this dimming of momentum this past week, as Bitcoin (BTC USD) rushes past the $116K mark at press time, the question is will it sustain this recovery.

M2 Money Supply Peak Threatens Liquidity

Bitcoin’s consolidation coincided with signals that the US M2 money supply might peak in September, traditionally creating headwinds for risk assets.

The M2 money supply measures cash, checking deposits, and easily convertible near money, serving as a key liquidity indicator for financial markets.

Treasury General Account refill processes historically drain hundreds of billions from financial systems over 2-4 month periods.

The upcoming refill threatens to pull $500-600 billion from markets as the Treasury rebuilds cash reserves, according to Delphi Digital analysis.

As a result, liquidity in crypto might turn tight, adding to the slowdown period.

Leverage Drives Market Volatility

Futures market activity accelerated during the recent correction despite muted on-chain profit-taking.

Glassnode reported that open interest across Bitcoin (BTC USD) futures contracts remained elevated at $67 billion, with over $2.3 billion unwound during the sell-off.

Combined liquidations across major altcoins reached $303 million per day, experiencing more than twice the liquidation volume compared to Bitcoin futures markets.

In addition, altcoin open interest briefly hit a record $60.2 billion before declining $2.6 billion as prices corrected.

Bitcoin (BTC USD) dominance declined from 65% to 59% over two months, signaling active capital reallocation toward alternative assets.

This pattern historically coincided with phases of accelerating speculation across broader markets.

Combined with other indicators, these movements suggest market maturity similar to previous cycle peaks.

Long-term holders realized profit levels comparable to past euphoric phases, while Bitcoin’s price action echoed prior patterns where all-time highs occurred two to three months beyond current positioning.

Realized loss events reached $112 million per day during the local downtrend, remaining within typical ranges seen during bull market corrections.

This metric suggested the downturn had not meaningfully dented investor confidence yet.

The result is a combination of elevated leverage, profit-taking patterns, and speculative intensity marking characteristics of historically mature market phases.

However, each cycle carries unique traits, and Bitcoin may not conform to fixed temporal blueprints from previous periods.