Bitcoin rebounds, but the market remains cautious as short-term holders approach breakeven.

Despite recovering to nearly $98,000, Bitcoin (BTC) remains in a crucial technical area dominated by short-term holders; this recovery has lessened financial strain across the network, as noted in a recent analysis.

This analysis pointed out a shift in market dynamics, highlighting improved capital movement and positive investor sentiment. It also cautioned that the existing price structure could be at risk if pivotal support levels do not hold.

Last week, Bitcoin peaked at $97,900, representing its highest point in over two months. This surge temporarily mitigated underwater positions, enabling over 3 million BTC to shift back into profitability after a dip to approximately $74,000 in April.

Nonetheless, the market is in a pivotal phase, awaiting confirmation on whether Bitcoin can maintain stability above critical cost-basis levels, including the 111-day moving average and the realized price for short-term holders.

The analysis revealed that Bitcoin’s realized market cap has reached a record high of $889 billion, reflecting a 2.1% increase over the past month. This metric gauges cumulative capital based on the acquisition price, indicating a rise in value entering the network.

At the same time, realized profits have topped $1 billion daily, showcasing robust demand that is able to absorb profit-taking activities from recent purchasers.

As of the latest data, Bitcoin was trading at $96,844, marking a 2.64% increase in the past 24 hours.

Significance of short-term holders as ETF interest rises

The amount of BTC held at a loss has diminished to 1.9 million, but recent buyers still make up a substantial portion of these holdings. Short-term holders (STHs) account for 83% of coins in unrealized loss, with many having entered at prices above $96,000.

Previously, these investors faced significant stress, as unrealized losses reached concerning levels earlier this year. However, that stress has eased, with STH unrealized loss metrics returning to neutral territory, suggesting many of these accounts are nearing breakeven.

This shift has also altered spending habits, with STHs more frequently realizing gains instead of losses. This change may indicate a turning point, hinting that this group is regaining confidence and selectively reducing risk.

Investor activity has broadly increased, with total realized profit and loss volumes hitting $1 billion daily, a figure only surpassed in 15% of trading sessions during this cycle.

This increase signifies renewed market interest, although the analysis warned that much of this activity may still be a reaction to short-term price movements rather than stemming from long-term conviction.

Institutional interest, which had diminished in recent months, seems to be recovering. U.S. spot Bitcoin exchange-traded funds (ETFs) have attracted over $4.6 billion in inflows over the past two weeks, countering the 70,000 BTC in net outflows recorded during the previous downturn.

Total assets managed in U.S. ETFs currently amount to 1.171 million BTC, just 11,000 BTC shy of the all-time high set earlier this year.

The uptick in ETF demand is a positive indicator that institutional allocators are beginning to reinvest capital into Bitcoin after a period of caution. This increase coincides with a broader rise in market liquidity and capital deployment observed on-chain.

Potential underpricing of volatility

Despite the upward momentum and renewed capital activity, volatility expectations in derivatives markets are on the decline. Both one-week and one-month at-the-money implied volatility are now at their lowest levels since July 2024, with similar trends in longer-duration contracts.

Implied volatility premiums for contracts set to expire between May and March 2026 have all decreased, indicating that even long-term options are pricing in relatively low expectations for price fluctuations.

This restrained volatility environment may serve as a counter-indicator, especially given the market’s proximity to dense cost-basis clusters in the range of $94,000 to $96,000. The Realized Supply Density metric, which reflects BTC acquisition volumes near the current price, has notably increased.

This concentration means that even minor price changes could significantly influence investor behavior, particularly among those who acquired assets during the consolidation period from December to February.

While the recent rally has enhanced profitability across the network and improved overall market structure, Bitcoin’s position near essential support and resistance levels implies that further gains are not assured. If BTC fails to maintain its position above its short-term cost basis and moving averages, it will put current market strength to the test.

Topics Covered