Cryptocurrency analytics company Glassnode, in its new report evaluating the current state of the Bitcoin (BTC) market, explained the key factors behind last week’s decline. According to the company, futures traders and spot Bitcoin ETF investors led the selling pressure, while on-chain data shows that new capital continues to flow into the market.
According to Glassnode, Bitcoin briefly lost the gains it made last week from the price breakout three weeks ago. Falling below $81,000 on Thursday, BTC finished the week down approximately 3% despite a weekend recovery. On Monday, Bitcoin was trading below the $83,000 level.
Glassnode: Two Groups Led the Selling Pressure in Bitcoin
The report stated that one of the most significant reasons for the decline was selling in the perpetual futures market. Investors who had been aggressively buying and selling in this market became strong net sellers, while funding rates fell below the lower end of the historical trading range.
However, the fact that open positions in futures remained at high levels indicated that leveraged positions in the market had not yet been significantly reduced.
A notable change was also observed in spot Bitcoin ETFs. Weekly net money flow shifted from inflows to outflows of approximately $700 million. Thus, the selling pressure created by institutional investors through ETFs became one of the factors accelerating the pullback in the Bitcoin price.
Although a selling trend was observed in the spot market, Glassnode reported that the selling pressure there remained within normal ranges.
Option Investors Begin to Protect Themselves Against the Decline
Another notable development in the report occurred in the Bitcoin options market.
According to Glassnode, investor demand for protection against downward price movements has increased significantly. The 25-delta skew indicator, which measures this, has more than doubled despite remaining within its historical trading range.
The increase in open positions in the options market during the same period indicated that investors were strengthening their hedging positions against price declines.
New Money Continues to Inflow into Bitcoin
According to the report, while the number of active addresses and transaction fees on the Bitcoin network have decreased from last week’s highs, transfer volume remains above the upper end of its historical range.
More importantly, the monthly change in Bitcoin’s realized market value (realized cap) and the share of hot money in total market capitalization are both above their historical upper limits. Glassnode stated that this data indicates that new capital inflows into the Bitcoin market are continuing.
On the other hand, slightly more than 70% of the Bitcoin supply is still in profit. Unrealized gains by short-term investors and realized profit-taking also continue to remain above historical highs.
