Bitcoin has spent the last two weeks trading within a zone that evokes both respect and apprehension among traders. The price has approached the True Market Mean, which represents the cost basis of all active coins minus miners, and has so far maintained its position just above this critical level.
According to data from Glassnode, this level is historically significant as it delineates the boundary between lighter bear market phases and more severe ones. The current price structure closely resembles patterns observed in the first quarter of 2022.
In mid-November, the spot price of Bitcoin moved below the 0.75 supply quantile, and it is now trading near $96.1K, resulting in more than 25% of the total supply being underwater.
Concurrently, there are indications that sellers may be nearing exhaustion. The 0.85 quantile, situated near $106.2K, remains a crucial resistance level. Until the price reclaims this level, macroeconomic shocks are likely to continue exerting significant influence over its direction.
Glassnode data reveals that Bitcoin's Net Change in Realized Cap is currently reading +$8.69 billion per month. While this figure is considerably weaker than the peak of $64.3 billion per month observed in July, it is not indicative of a negative trend.
As long as the Net Change in Realized Cap remains above zero, the price has the potential to build a base rather than experiencing a significant downturn. Meanwhile, long-term investors are continuing to sell into strength, albeit with diminishing margins, as evidenced by the Long-Term Holder SOPR (30D-SMA) standing at 1.43.
Derivatives and Options Markets Show Reset Risk
Demand in the spot market appears to have softened. U.S. Bitcoin ETFs experienced net outflows throughout November on a three-day average basis, marking a departure from the consistent inflows that previously supported the price. These outflows have affected multiple issuers simultaneously, indicating a pullback by institutions as market pressure intensified. This situation leaves the price more vulnerable to external shocks.
Simultaneously, the Cumulative Volume Delta (CVD) on Binance and across aggregate exchange groups has turned negative, signaling consistent selling pressure from takers. Coinbase's CVD has also flattened, removing a key indicator of U.S. bid strength. With both ETF flows and CVD indicating a defensive stance, spot demand has become thin.
The derivatives market has followed a similar trend. Futures open interest continued to decline through late November, with the unwind occurring in a slow and orderly fashion. The leverage that was built up during the uptrend has largely been unwound, and new leverage is not entering the market. Funding rates have cooled to near zero after months of positive prints. While modest negative funding has appeared at times, it has not been sustained. This suggests that short sellers are not aggressively pressing their positions, and overall positioning is neutral and flat.
In the options market, implied volatility has decreased following a spike last week. Bitcoin's failure to sustain a price above $92K led to sellers re-entering the market, causing short-dated volatility to fall from 57% to 48%. Mid-tenor volatility slid from 52% to 45%, and long-dated volatility eased from 49% to 47%.
Short-term skew decreased from 18.6% to 8.4% after Bitcoin's price rebounded from $84.5K, a move linked to the Japanese bond shock. Longer-term maturities experienced slower adjustments. Traders had pursued short-term upside opportunities but remained uncertain about sustained follow-through.
Early in the week, trading activity showed a significant leaning towards put buying, driven by fears of a recurrence of the August 2024 carry-trade stress. Once the price stabilized, trading flow shifted to calls during the subsequent rebound.
At the $100K call strike, the premium from sold calls continues to exceed the premium from bought calls, and this gap widened over the past 48 hours. This indicates a lack of strong conviction among traders to reclaim the six-figure level. Furthermore, traders appear to be positioning themselves cautiously ahead of the FOMC meeting, refraining from aggressively chasing upside opportunities.
Crypto entrepreneur Lark Davis commented on the market dynamics, noting that crypto whales dumped the market, and shortly thereafter, "Charles Schwab, Vanguard and Bank of America all roll out crypto to their clients in the same week. What a happy coincidence!"