Bitcoin shows indications of fatigue after a surge influenced by the Federal Open Market Committee meeting. Long-term holders have locked in profits totaling 3.4 million BTC, as inflows to exchange-traded funds show signs of deceleration, indicating a possible cooling period for the market. The recent rally witnessed Bitcoin’s price soaring to approximately $117,000, before entering a corrective phase characterized by a “buy the rumour, sell the news” dynamic. Despite this, the on-chain drawdown remains mild at 8%, which stands in stark contrast to the more significant declines observed in previous cycles. Notably, the realized cap inflows have surged to $678 billion, underscoring significant capital rotation and distribution.
In this market phase, long-term holders have made a notable impact, cashing in on 3.4 million BTC in profits. This significant distribution corresponds with historical trends, indicating that long-term holder activity frequently signals market peaks. The realized profits in the current cycle have already exceeded those of earlier cycles, signaling a more developed rally. ETF inflows, previously a significant factor in absorbing supply, have seen a notable decline surrounding the FOMC meeting. The decline in institutional demand, along with a rise in long-term holder distribution, has resulted in a precarious market equilibrium. The short-term holder cost basis at $111,000 stands out as a pivotal threshold that must be upheld to avert additional market cooling.
During the recent sell-off, spot market volumes surged, propelled by forced liquidations and a lack of liquidity. This scenario intensified the downturn, establishing a provisional support level slightly above the short-term holder cost basis. At the same time, futures markets experienced a significant deleveraging as Bitcoin’s price dipped below $113,000, leading to a decrease in open interest from $44.8 billion to $42.7 billion. This deleveraging event, though destabilizing, served to eliminate excess leverage from the market.
The options market responded to these shifts, as implied volatility increased due to heightened hedging demand. The market experienced a notable repricing of skew following the FOMC, as heightened demand for puts suggests a shift towards defensive positioning. The put/call volume ratio saw a downward trend as traders secured profits on in-the-money puts, paving the way for opportunities for those holding a positive outlook as the year comes to a close. The market is showing clear signs of exhaustion, as liquidity-driven swings take center stage in the current landscape. Unless institutional demand aligns with holder sentiment, the risk of deeper cooling remains high, indicating a macro structure that increasingly resembles market fatigue.