Glassnode: BTC Remains in Bottom-Building Phase, Current Rebound Difficult to View as Trend Reversal

The bear market capitulation phase requires more time for bottom building.

Written by: glassnode
Compiled by: Blockchain Simplified

The weakening dollar has failed to boost Bitcoin, as the yield on the 10-year U.S. Treasury bond has risen to around 4.7%, keeping the financial environment in a tightening state. The high real yield remains a major macroeconomic resistance suppressing prices.

Gold remains around $4,400, and crude oil is hovering in the mid-$80s, highlighting that Bitcoin has not participated in the broader buying of scarce assets. Its trading characteristics still reflect sensitivity to liquidity as a risk asset rather than an inflation hedge. Both the spot price and the cost basis for short-term holders (at $68,500) are below the actual market average ($75,800), confirming that the market is in a capitulation phase, where the turnover price is simultaneously lower than the cost basis of recent buyers and a broader range of active investors.

The peak of unrealized losses is around 0.25 (previous cycles have exceeded 0.6), indicating that this pullback is shallower and more widespread; meanwhile, the realized profit-loss ratio is at 0.75, still above the historical threshold of below 0.5 that marks the exhaustion of selling pressure.

Demand for perpetual contracts has turned positive, and ETF outflows have stabilized after experiencing a low of -5,000 BTC per day, but the ongoing negative Coinbase premium and a drop to the mid-30s in DVOL indicate that both spot participation and directional consensus are still lacking.

Macro Insights

**Weak Dollar Faces Yield Pressure**
The macro environment facing Bitcoin remains contradictory. The U.S. Dollar Index (DXY) has retreated from its July peak, which typically benefits risk assets; however, the yield on the 10-year U.S. Treasury bond continues to rise to around 4.7%. Bitcoin has yet to respond positively to the dollar's weakness, with prices still anchored around the cyclical lows of $60,000 to $65,000.

This divergence indicates that persistently high real and nominal yields remain a core macro constraint, maintaining a tight financial environment and increasing the opportunity cost of holding non-yielding assets. To create a more favorable macro backdrop for Bitcoin, not only does the dollar need to weaken, but there must also be a sustained decline in U.S. Treasury yields.

Bitcoin Lags Behind Hard Asset Buying

This divergence is also significant in the hard asset space. Gold hovers at high levels around $4,400, crude oil has rebounded to the mid-$80s, while Bitcoin remains in the $60,000 to $65,000 range after a sharp drop earlier this year.

This indicates that Bitcoin has not captured the inflow of funds into scarce or inflation-sensitive assets, continuing to behave as a risk asset sensitive to liquidity. To confirm stronger macro recovery signals, we need to see Bitcoin begin to narrow the performance gap relative to gold and crude oil.

On-Chain Insights

**Capitulation Phase Established**
Shifting from the macro backdrop to on-chain valuation, the structural trend has remained consistent since early February 2026 when prices broke below the actual market average and the short-term holder cost basis. This breakdown established a bear market pattern, indicating that Bitcoin's trading price is now below the cost basis of recent buyers and a broad spectrum of active investors.

As the bear market deepens, the short-term holder cost basis has dropped to $68,500, falling below the actual market average of $75,800, representing that the current token turnover price is below the cost basis of these two major groups. This structure is a typical feature of the capitulation phase, where historical cycle bottoms often form within this range. As long as prices remain below the short-term holder cost basis, on-chain valuation models will determine that the market is in a capitulation phase—new buyers in this stage accumulate with high certainty, but the overall market remains extremely fragile to adverse macroeconomic headwinds.

Shallower Pain, Longer Bottoming

Since mid-May, the market has been in the capitulation range for nearly three months, with a notable characteristic of this cycle being the relatively mild intensity of investor pain. The peak of relative unrealized losses (measuring the total unrealized losses across the network as a proportion of total market capitalization, reflecting potential financial pressure) in this cycle has only approached 25%, far below the levels exceeding 60% during previous cycles' capitulation phases. Therefore, the severity of losses borne by trapped investors is not as severe as in past bear markets.

This partly reflects that the pullback so far has been shallower, but also because a large supply was absorbed at prices far below historical highs during the election period, resulting in a relatively even distribution of upper selling pressure rather than being concentrated at the cycle top. The lower cost basis of loss-making chips has alleviated overall pain but also means that digesting this dispersed upper trapped supply will take longer, directly leading to the current sideways oscillation and prolonged bottoming process.

No Exhaustion, No Bottom Building

Experiencing a capitulation phase with only moderate pain raises the core question: where is the ultimate pain point, and when will the cycle low form? Accurately predicting the bottom is impossible, but the path to exhaustion of selling pressure will likely involve either a longer bear market duration, deeper price discounts, or both.

This cycle exhibits both characteristics: significant declines occurred in the latter half of January 2026 and in May, and it has been operating within a confirmed bear market pattern for over seven months. The difference is that the current capitulation phase has been shorter and shallower so far. Although bottoming characteristics have emerged, it remains uncertain whether macro catalysts will trigger a deeper round of declines in the coming months. Based on the 90-day moving average, the realized profit-loss ratio historically needs to drop below 0.5 to mark the exhaustion of cyclical selling pressure, while the current indicator is at 0.75. Until this indicator reclaims the critical threshold of 2.0, any rebound should be viewed as a local increase rather than a trend reversal.

Off-Chain Insights

**Demand for Perpetual Contracts Turns Positive**
The 30-day perpetual contract market directional premium has rebounded significantly back into positive territory after experiencing a deep negative turn following a recent sharp decline. This indicates that leveraged traders are once again willing to pay a premium for long risk exposure, reflecting a significant improvement in speculative risk appetite.

However, compared to the extreme positive premiums seen in previous impulse markets, the current readings remain relatively mild. This suggests that derivative positions have shifted to a bullish bias but have not yet reached a state of frenzy; if prices can rebound more clearly, there is still room for further expansion of long positions.

U.S. Spot Demand Yet to Materialize

Despite improvements in perpetual contract sentiment, the Coinbase premium index remains negative, indicating that U.S. spot demand has not yet formed effective support. During most of the recent oscillation period, even as Bitcoin stabilized in the $60,000 to $65,000 range, this premium remained below the zero axis.

This has led to a clear divergence between the recovering leveraged risk appetite and the lackluster spot participation. Only when the Coinbase premium consistently returns to positive territory can it strongly prove that the market recovery is driven by genuine U.S. spot accumulation rather than solely relying on derivatives.

Massive Outflows Followed by ETF Funds Stabilizing

The flow of U.S. spot ETF funds has shown substantial improvement compared to the severe sell-off in June and early July (when the 7-day average fell to around -5,000 BTC per day). Since then, fund inflows have repeatedly returned to positive territory, culminating in a strong accumulation wave in early August.

The latest readings have slightly turned positive again after briefly turning negative, indicating that selling pressure at the institutional level has significantly eased, but sustained accumulation momentum has yet to form. If a more enduring positive inflow into ETFs can be achieved, it will further reinforce the logic that compliant spot demand is re-accumulating at the bottom of the current oscillation range.

Implied Volatility Compressed to Cycle Low

The Bitcoin DVOL index has fallen to the mid-30s, placing implied volatility in the low range of the past two years. This indicates that although Bitcoin remains near recent lows, the options market's pricing of forward volatility expectations is relatively subdued.

This level of volatility compression suggests that the market's expectation of significant fluctuations in the short term has been greatly reduced. While low implied volatility itself does not indicate direction, prolonged volatility squeezes can make the market more sensitive to potential catalysts; once a catalyst appears, it can easily trigger a sharp expansion of volatility.

Demand for Downside Hedge Cooling

The 25-delta skew across the entire volatility curve remains positive, indicating that put options still maintain a premium compared to call options, and investors are still willing to pay for downside protection.

However, the short-term skew has significantly compressed, with the 1-week expiration skew dropping to recent lows, while longer expiration skews remain around 10% to 13%. This indicates that short-term panic sentiment has substantially eased, although investors still maintain a cautious attitude over longer periods.

Options Liquidity Concentrating at $65,000

In the past 24 hours, options premium trading has been highly concentrated around the $65,000 strike price, where large put buying has encountered a correspondingly large put selling. This reflects a fierce two-way game of funds in the current price range rather than forming a clear directional consensus.

On the higher price curve, call option buying is mainly concentrated around $68,000 and $130,000, indicating structural demand for upward price movement; while significant put buying at $45,000 suggests that some investors are still positioning for deep downside protection. Overall, the holding structure remains highly divergent, with core strategies focusing on risk management around the current spot range.

Conclusion

The macro environment remains the main constraint: the weakness of the dollar is offset by the rise in the 10-year U.S. Treasury yield to around 4.7%, and Bitcoin lags behind the buying of gold and crude oil.

On-chain models show that prices are below the actual market average and the short-term holder cost basis, confirming that we are in a capitulation phase; however, relative unrealized losses peak around 0.25 (historically above 0.6), indicating that this round of pullback is shallower and more evenly distributed, requiring time rather than deeper price declines to digest. Off-chain signals also show divergence: demand for perpetual contracts has turned positive, ETF outflows have stabilized, but the Coinbase premium remains negative, and implied volatility is suppressed at cycle lows. The realized profit-loss ratio is reported at 0.75, confirming that the exhaustion of selling pressure has not yet arrived. Before yields decline and this ratio reclaims the 2.0 threshold, any recovery should be viewed as a local rebound in the bottom-building process.