Bitcoin Market Faces Cooling Momentum Amid High-Risk Environment

The Bitcoin market is currently navigating a high-risk environment without being overheated, as reported by Glassnode. This phase is characterized by diminishing spot market strength, high profitability levels, and cautious but steady participation in derivatives and ETFs. The absence of renewed demand from both retail and institutional investors could prolong the cooling momentum.

Spot and Futures Market Analysis

After failing to maintain momentum above the $111K mark, Bitcoin’s rally has entered a cooling phase. Spot market indicators show weakened signals, with momentum nearing neutral levels, a sharp negative turn in spot CVD, and a decline in volume below statistical lows. These trends suggest a decrease in retail participation and a shift away from aggressive buying strategies.

Meanwhile, the futures market has displayed more stability. Open interest remains close to cycle highs, and long-side funding has stayed positive, indicating that leveraged traders are maintaining their positions. However, the notable reversal in perpetual CVD points to short-term traders reducing their risk exposure.

Options and ETF Activity

In the options market, implied volatility premiums are elevated, with the volatility spread nearing its high band. The delta skew has shifted from a call-heavy to a mildly put-heavy orientation, suggesting a subtle move towards downside hedging after a period of risk-on bias.

ETF flows have increased significantly, highlighting ongoing institutional interest. However, the decline in trade volume indicates a preference for passive accumulation over active trading. On-chain fundamentals remain neutral, with flat active addresses, moderate transfer volumes, and decreasing fees, reflecting subdued organic activity.

Liquidity and Profitability Metrics

Liquidity indicators, such as Hot Capital Share and Realized Cap Change, show a slight retreat, aligning with a pause in capital rotation. The Short-Term Holder (STH) to Long-Term Holder (LTH) Supply Ratio has dropped below its statistical low band, emphasizing a strong presence of long-term holders.

Profitability metrics are high, with nearly 97% of the supply in profit and healthy levels of realized profit-taking. Although not yet in a euphoric state, this configuration raises the risk of distribution if new demand does not materialize.

Overall, the market’s current state is marked by fading spot strength, high profitability, and cautious participation in derivatives and ETFs. Without increased demand from both retail and institutional sectors, the cooling trend may continue, according to Glassnode.

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