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Bitcoin continues to battle one of its most challenging phases of the year as declining spot demand, negative ETF flows, and fading confidence in derivatives markets apply persistent downward pressure. After a strong run earlier in the cycle, BTC has slipped below key cost-basis models and is struggling to reclaim previously stable support zones — a signal that sellers continue to outweigh buyers across short-term orders.
According to on-chain analytics platform Glassnode, the shift reflects a notable deterioration in market sentiment. The weakening demand for spot BTC has coincided with a continued pullback from institutional allocators using U.S. spot ETFs, creating a shortage of new inflows large enough to absorb selling pressure. The resulting imbalance has left Bitcoin vulnerable to sharper drops during periods of heightened volatility.
A return to local lows as support levels fail
Bitcoin recently dipped below $97,000 and briefly touched $89,000, marking its lowest point in months and forcing its year-to-date performance into negative territory. The area between $95,000 and $97,000 has now flipped into a zone of resistance, and analysts expect that reclaiming this range will be necessary for Bitcoin to attempt a coordinated recovery.
For traders who rely on technical models, the most concerning signal is that BTC has fallen below the short-term holder cost basis — the average price paid by more recent entrants to the market. Once the spot price trades below this metric, short-term holders tend to exit positions rapidly to minimize realized losses. That pattern is visible again today.
Glassnode data shows that the 7-day EMA of realized losses has climbed to $523 million per day, the highest level since the fallout from the FTX collapse. Heavy realized losses usually indicate that panic selling is underway, particularly among investors who accumulated near recent highs and are now underwater.
The role of the $88,600 level
While many traders focus on psychological price points such as $90K or $100K, analysts are emphasizing the importance of the active investors’ realized price — approximately $88,600. If BTC manages to hold above this threshold, it may build a base for recovery. However, a decisive break below it would reflect a deeper shift toward bearish momentum and could invite further selling pressure.
This fragile setup has left traders preparing for both scenarios: a relief bounce if price reclaims higher levels or a continuation of the downturn if selling persists.
Derivatives markets reveal risk-off positioning
Futures and options markets are confirming the cautious mood. Futures open interest has continued to decline, showing that traders are reducing exposure rather than building bullish positions. A pullback in open interest typically signals a transition away from speculative activity and toward a risk-management mindset.
Options markets tell a similar story. Implied volatility has risen sharply, meaning traders are preparing for larger price swings. Meanwhile, skew remains negative as participants pay premiums for put protection rather than call exposure, highlighting a defensive stance across institutional and experienced derivatives traders. When both futures and options show reduced risk appetite, it becomes difficult for price to sustain meaningful upside momentum.
ETF flows add another layer of pressure
Spot Bitcoin ETFs in the United States have been instrumental in driving institutional demand since their debut. However, in recent weeks, those flows have turned negative — indicating that traditional market allocators are not adding new exposure to Bitcoin at present.
ETF outflows remove an important support structure because they reduce consistent buy-side liquidity. Bitcoin historically performs best when multiple forms of demand — retail, derivatives leverage, and institutional flows — align. With ETF buying decelerating, one of the strongest structural demand pillars remains absent.
A difficult market structure for short-term traders
The combination of selling pressure, falling open interest, increased demand for downside hedging, and negative ETF flows paints a picture of caution rather than confidence. While this setup does not guarantee further losses, it does mean that Bitcoin currently lacks the momentum catalysts that traditionally drive sharp recoveries.
Short-term traders in particular are feeling the squeeze. Many who bought near recent highs now face unrealized losses and are reacting emotionally to downward price movement. In contrast, longer-term Bitcoin holders tend to remain inactive during downturns, which limits supply relief for short-term selling but does not add bullish force either.
Whether the trend deepens or stabilizes depends on demand
Bitcoin has weathered similar phases throughout past cycles. In each instance, restoring demand — either through ETF inflows, macroeconomic easing, or renewed risk appetite — has been the deciding factor in reversing downward trends. Without a fresh source of capital or shifting sentiment, the market remains exposed to continued volatility.
What the coming weeks bring will likely depend on whether institutional allocators re-enter the market, whether derivatives traders reduce protection-heavy positioning, and whether Bitcoin can hold above critical realized-price support levels.
Outlook
For now, traders and analysts agree on one thing: price action will remain fragile as long as demand remains weak and derivatives positioning reflects caution. A move back above $95,000–$97,000 would signal improving momentum, but a decisive breakdown below $88,600 could signal a continuation of the decline.
Bitcoin remains one of the most resilient assets across digital markets, yet even strong long-term narratives are tested during liquidity-driven downturns. Whether this period becomes a temporary reset or the beginning of a deeper pullback will depend heavily on whether buyers regain control over the weeks ahead.
