Bitcoin Market Dynamics: Is Seller Exhaustion Approaching?
A recent in-depth analysis indicates that those divesting their Bitcoin holdings might be reaching a point of depletion. The digital asset experienced a notable decline, dropping below the ninety thousand dollar threshold and briefly touching eighty thousand five hundred dollars. This downward movement has pushed key market momentum metrics into highly oversold territory, hinting at a potential deceleration in selling pressure.
The Glassnode weekly report highlights that the 14-day Relative Strength Index (RSI) for Bitcoin plunged to 18.8, a level rarely seen this year. Such low readings typically suggest that an asset is oversold and that the bearish momentum could be losing steam. Complementing this, the spot market's Cumulative Volume Delta (CVD) saw an improvement, moving from negative $530 million to negative $216 million. This shift implies a reduction in aggressive selling orders on the spot exchanges. Furthermore, a rise of 11.6% in spot trading volume as participants re-evaluated their positions around the mid-eighty thousand dollar range reinforces the idea that the market might be in the latter stages of a corrective phase.
Despite these signs of potential seller exhaustion in the spot market, the derivatives landscape still reflects a defensive stance. Open interest in futures contracts decreased by 5%, primarily due to the unwinding of existing positions rather than the establishment of new short bets. Funding rates continued their decline, indicating a diminished demand for leveraged long positions and suggesting that bullish investors are no longer willing to pay a premium to maintain their long exposures. The perpetual CVD remained negative, signifying that sellers continue to dominate market orders. A significant increase in options volatility spread, coupled with the 25-delta skew moving above its upper band, points to a strong demand for protection against further downside risks. Options open interest held steady, which Glassnode interprets as a sign of caution rather than an expansion of speculative activity.
Institutional sentiment appears to be shifting towards a more cautious approach, as evidenced by ETF flows. The week saw a substantial $1.9 billion in net outflows from Bitcoin ETFs, representing one of the weakest performances in several months. Concurrently, the trading volume for these ETFs surged by 47.5% to $40 billion, suggesting that heightened volatility attracted increased trading activity. These trends collectively indicate that institutional investors are adopting a more defensive posture in response to price instability and weakness observed in the derivatives markets.
Underlying on-chain fundamentals remain subdued. While the number of active addresses saw a slight increase, the transfer volume nearly doubled to $16.1 billion. This surge was primarily driven by large reallocations of capital rather than speculative activity from retail investors. A decline in fee volume suggests lower demand for block space and a more tranquil environment on the blockchain. Capital flow metrics also presented a soft picture, with the Realized Cap Change dropping by 28%, indicating weaker net inflows into the network. The share of short-term holders climbed to 18.5%, implying a higher susceptibility to price fluctuations. Additionally, the Hot Capital Share increased to 37.7%, indicating that a greater proportion of capital is actively moving within the market.
The technical outlook for Bitcoin's recovery hinges on its ability to test the $94,000 level. This recent rebound marks the first significant positive reaction after several weeks of controlled selling within a descending channel that began in early October. However, the price continues to trade below the 20-, 50-, 100-, and 200-day Exponential Moving Averages, which are clustered between $94,000 and $106,500. This range forms a formidable resistance ceiling that has thwarted every attempt at a rally over the past month. The Donchian Channel indicates that the price is still in the lower half, signaling improvement but not yet a structural reversal. A critical band exists between $94,000 and $100,000, where previous support now acts as significant resistance. Successfully surpassing this area could pave the way for a move towards $102,000 to $106,000. Conversely, strong support at $80,500 remains crucial; a breach of this level risks exposing the lower boundary of the channel and could signal a deeper corrective phase.
The market appears to be at a crossroads, with signs of a potential bottom forming from a technical and spot market perspective. However, caution persists in derivatives and institutional segments, suggesting that any sustained recovery will need to overcome significant resistance and a prevailing defensive sentiment.