Cwallet Weekly Crypto Express | Bitcoin Remains in A Structurally Fragile State

Executive Summary

• Bitcoin trades in a fragile $81K–$89K range after losing key cost-basis support, mirroring Q1 2022 weakness.
• Realized losses are elevated, with STH loss ratios collapsing to 0.07x, signaling fading liquidity and demand.
• Long-term holders still realize profit, but their momentum is weakening and could shift if liquidity deteriorates further.
• Futures markets show orderly deleveraging, neutral funding, and reduced leverage across BTC and altcoins.
• Options positioning remains defensive, with heavy puts near 84K and upside still being faded around 100K.
• Implied volatility stays elevated, and the December expiry is shaping up as a key volatility event.
• Overall sentiment is cautious, and recovery requires reclaiming major cost-basis models and renewed inflows.

On-chain Insights

Drifting Into Void

Trading below the short-term holder cost basis (~$104.6K) since early October has pushed Bitcoin into a zone that highlights the market’s lack of liquidity and demand. Price is now retesting a major structural range typically defined by the Active Realized Cap Price (the cost basis of all non-dormant coins) and the True Market Mean, which reflects coins acquired on the secondary market.

Over the past weeks, Bitcoin has compressed into the $81K–$89K band, a structure closely resembling the Q1 2022 post-ATH interval, where the market weakened under fading demand. This current range echoes the same dynamic with market drifting lower, constrained by limited inflows and fragile liquidity.

Losses Stack Up

Transitioning deeper into this comparison, another angle that mirrors Q1 2022 is the sharp rise in Entity-Adjusted Realized Loss (30D-SMA), now climbing to $403.4M per day.

This level exceeds the waves of realized losses seen at both major lows earlier in this cycle, signalling a clear erosion of confidence in the uptrend. Such elevated loss realization is typical of a weakened, liquidity-seeking market, where investors increasingly exit at a loss as momentum fades.

Liquidity Stress Signals

With market structure weakening, liquidity becomes the key lens for understanding what comes next. A prolonged low-liquidity regime increases the risk of further contraction, and the STH Realized Profit/Loss Ratio offers one of the clearest windows into current demand momentum.

This ratio, which compares realized profits to realized losses among recent investors, slipped below its neutral Mean (4.3x) in early October and has now collapsed to 0.07x. Such overwhelming loss dominance confirms that liquidity has evaporated, especially after the heavy demand absorption seen in Q2–Q3 2025 as long-term holders increased their spending.

If this ratio remains depressed, market conditions could begin to mirror the weakness of Q1 2022, raising the risk of a breakdown below the True Market Mean (~$81K).

Long-Term Liquidity at Risk

Liquidity traced through the realized profit/loss lens can also be extended to long-term momentum by examining the LTH Realized Profit/Loss Ratio. The 7D-SMA of this metric has followed the spot price lower, sharply dropping to 408x. Trading above ~100x still indicates healthier liquidity conditions compared to Q1 2022 or the major bottom-formation phases of this cycle, meaning long-term holders are still realizing profit, not loss.

However, if liquidity continues to fade and this ratio compresses toward 10x or lower, the probability of transitioning into a deeper bear market becomes difficult to ignore. This threshold has historically marked severe stress across long-term cohorts.

Off-Chain Insights

Leverage Bleeds Out

Shifting to off-chain dynamics, futures open interest continues to fall alongside price, steadily unwinding the leverage accumulated during earlier rallies. This deleveraging has remained orderly, with little evidence of forced liquidations, suggesting derivatives traders are adopting a controlled, risk-off posture rather than panic unwinding.

The market now rests on a leaner leverage base, which lowers the odds of sharp, liquidation-driven volatility and reflects a more cautious, defensive positioning across futures markets.

Funding Turns Cautious

In parallel to the drop in open interest, perpetual funding rates have hovered near neutral, with occasional dips into negative territory. This marks a clear shift from the consistently positive funding typical of more speculative phases, signalling a more balanced and cautious derivatives environment.

Neither aggressive short exposure nor strong long interest is taking control, leaving the market in a tentative state of fragile equilibrium as traders wait for clearer signals before committing to direction.

Conclusion

Bitcoin remains in a structurally fragile state, trading within the $81K–$89K range after breaking below key cost-basis levels. On-chain data shows rising stress: STH loss ratios collapsing to 0.07x, long-term holders reducing profit margins, and realized losses reaching levels comparable to early-cycle lows. Liquidity continues to thin, and unless demand strengthens, the risk of retesting the True Market Mean (~$81K) remains elevated.

Off-chain signals echo this caution. Futures open interest is unwinding steadily, funding rates are neutral, and leverage across major assets has faded. In the options market, heavy put interest near 84K, capped call appetite near 100K, and elevated implied volatility all point to a market bracing for volatility into the December expiry. Upside flows are still being faded, while downside protection is stabilizing rather than disappearing.In sum, Bitcoin is not in full capitulation but remains firmly in a low-liquidity, low-conviction environment. Until price reclaims major cost-basis levels and fresh demand returns, the market is likely to stay in a defensive consolidation phase.

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