Executive Summary
The Story So Far
Why This Matters
Who Thinks What?
Bitcoin is experiencing declining trading volumes and increasing bearish market sentiment, driven by a lack of investor conviction and rising selling pressure, according to a Monday report from on-chain analytics firm Glassnode. Despite a slight recovery to trade above $110,000 in early Asian trading on Tuesday, the cryptocurrency’s consolidation reflects a broader market shift towards risk-off behavior.
Market Sentiment and On-Chain Metrics
Glassnode’s report highlighted a significant drop in Bitcoin’s Relative Strength Index (RSI) last week, falling from 37.4 to 33.6. This decline pushed the RSI into oversold territory, signaling growing selling pressure across the market.
Spot trading volumes also saw a nearly 9% decrease, dropping to $7.7 billion. This reduction in volume indicates weaker investor participation and heightened uncertainty in market sentiment, with lower volumes during price moves often reflecting a lack of conviction behind recent trends.
Futures and Options Reflect Risk-Off Trend
A similar sentiment of subdued participation is evident in Bitcoin futures and options open interest, which also declined over the past week. This collective reduction suggests a “shift toward risk-off behavior” among investors, following Bitcoin’s recent pullback from its highs.
Short-Term Holders and Market Volatility
Glassnode further noted a greater influence from short-term holders (STH) in the market. The STH-to-LTH (long-term holder) supply ratio rose from 17.0% to 17.7%, indicating a potentially more volatile market environment as STHs are often prone to speculative and reactive trading behaviors.
Contrasting Views: Institutional Inflows and Cycle Analysis
Despite the increase in bearish pressure, the market also saw strong purchases from Bitcoin treasury companies and US spot exchange-traded funds (ETFs). These entities reversed nearly $1 billion in outflows to register significant inflows of $396.0 million last week.
Analyst Sees Healthy Correction
Meanwhile, CryptoQuant analyst Carmelo Alemán suggests that the market has not yet reached a cycle top. Alemán argues that previous Bitcoin bull cycles have featured substantial price corrections before surging to new highs, implying the current pullback is a healthy market adjustment.
Alemán added that Bitcoin’s institutional adoption and growing interest in tokenization could contribute to higher prices in the coming months. Using the Network Value to Transaction (NVT) ratio, he noted that Bitcoin has remained below 50 since July 7, reflecting robust network activity and growth potential.
Furthermore, Alemán emphasized that Bitcoin’s Market Value to Realized Value (MVRV) indicator has not yet reached levels typically associated with cycle peaks. This suggests that prices “has not yet entered an overheated phase,” indicating further room for growth.
In summary, Bitcoin is navigating a period of declining trading volumes and increasing bearish sentiment, driven by reduced investor conviction and a shift towards risk-off strategies. However, these pressures are partially offset by strong institutional inflows and analysis suggesting that the current market dynamics represent a healthy correction within a larger bull cycle rather than a definitive peak.
