Cwallet Weekly Crypto Express | BTC Traders Pay Top Price for Downside Hedge

Executive Summary

• Bitcoin has broken below the STH cost basis and the −1 STD band, placing recent buyers under stress; the $95K–$97K region now acts as key resistance, and a reclaim would mark an early step toward restoring market structure.
• Spot demand remains weak, with US spot ETF flows deeply negative and no incremental bid emerging from TradFi allocators.
• Speculative leverage continues to unwind, reflected in declining futures open interest and funding rates falling to cycle lows across the top 500 assets.
• Options markets have sharply repriced risk, with implied volatility rising across maturities and skew remaining deeply negative as traders pay significant premiums for downside protection.
• Put-dominant flow and demand at key strikes (e.g., 90K) reinforce a defensive positioning regime, with traders hedging more actively rather than adding upside exposure.
• DVOL has returned to monthly highs, tying together the broad repricing of risk across volatility, skew, and flow metrics and signalling expectations for elevated near-term volatility.

Bitcoin has broken below its earlier consolidation range, slipping under $97K and briefly touching $89K, marking a new local low and pulling its year-to-date performance into negative territory. This deeper contraction extends the mild bear trend we highlighted last week and raises questions about where structural support may re-emerge. In this edition, we use on-chain pricing models and short-term holder loss realization to assess how the market has reacted to this breakdown. We then turn to options, ETF flows, and futures positioning to evaluate how speculators are adjusting their sentiment amid this renewed weakness.

On-chain Insights

Breaking the Lower Band

Breaking below $97K, the lower boundary of last week’s “limbo range,” signaled the risk of a deeper correction. Price then plunged to $89K, forming a new local low beyond the –1 STD level (~$95.4K) relative to the short-term holder cost basis, now near $109.5K.

This breakdown confirms that losses now dominate nearly all recent investor cohorts, a structure that has historically triggered panic selling and weakened momentum, requiring time for the market to heal. In the short term, this $95K–$97K band can act as a local resistance, and reclaiming it would be an early indication that the market is moving back toward a degree of equilibrium.

Panic Selling Peaks

Transitioning to investor behavior, this plunge marks the third time since early 2024 that price has fallen below the lower band of the short-term holder cost-basis model. However, the intensity of panic among top buyers is notably higher this time. The 7D-EMA of STH realized losses has surged to $523M per day, the highest level since the FTX collapse.

Such elevated loss realization highlights the heavier top structure built between $106K–$118K, far denser than previous cycle peaks. This means either stronger demand must emerge to absorb distressed sellers, or the market will require a longer, deeper accumulation phase before regaining equilibrium.

Testing Active Demand

Revisiting the valuation models, the market now enters uncharted territory, where speculative interest in this mild bearish phase has noticeably increased. The first major defense zone sits at the Active Investors’ Realized Price, currently around $88.6K. Trading near this level places Bitcoin at the cost basis of non-dormant holders who actively moved coins in recent months, making it a potential mid-term trading range.

However, a decisive break below this model would mark the first time this cycle that price has fallen beneath the active-investor cost basis, a clear signal that bearish momentum is dominating the market.

A Different Kind of Drawdown

Despite breaking below the major lower band of the short-term holder cost-basis model, the scale and intensity of investor pain remains far from the extremes seen during the 2022–2023 bear market. The chart below tracks all coins currently in loss and groups them by the depth of their unrealized drawdown. Roughly 6.3M BTC are now underwater, with the majority sitting in the –10% to –23.6% loss range.

This distribution closely resembles the Q1 2022 short-lived range market, rather than a deep capitulation phase. This is why the price zone between Active Investors’ Realized Price ($88.6k) & True Market Mean ($82k) may serve as the definitive dividing range between a mild bearish phase and a full bear-market structure similar to 2022-2023.

Off-Chain Insights

Absence of ETF Demand

US Spot ETF flows continue to reflect a pronounced lack of sustained demand, with the 7-day average remaining firmly negative in recent weeks. Persistent outflows signal a reluctance among TradFi allocators to add exposure into the current drawdown, a clear departure from the strong inflow regimes that supported prior advances. The ongoing weakness suggests discretionary appetite has cooled materially and highlights the absence of incremental bid from one of the market’s largest marginal buyer cohorts, reinforcing the broader environment of constrained demand. The sustained absence in ETF inflows indicates that a major pillar of demand has yet to re-engage, leaving the market without a key source of demand this cycle.

No Sign of Risk Appetite

Futures open interest continued to drift lower this week, declining in tandem with price and signalling a persistent reduction in speculative activity. Rather than adding exposure into weakness, traders have been systematically unwinding risk, leaving the derivatives market notably under-positioned compared with prior drawdowns. This absence of incremental leverage underscores a cautious stance among market participants and aligns with the broader theme of fading demand across risk-taking cohorts.

The ongoing contraction in futures positioning highlights a market still reluctant to deploy capital, reinforcing the lack of conviction behind current price action.

Conclusion

Bitcoin continues to work through a challenging market phase defined by weakening market structure, retreating speculative demand, and a decisive shift toward risk-off positioning across derivatives. Spot-based demand remains absent, ETF flows are negative, and futures markets show no appetite to add leverage into weakness. Meanwhile, implied volatility, skew, and hedging flows all point toward heightened concern for near-term downside risk, with investors paying increasingly high premiums for protection. Together, these dynamics frame a market searching for stability, where the path forward depends on whether demand can re-emerge around key cost-basis levels or whether current fragility gives way to a deeper corrective phase or bear market.

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This content is strictly for informational and educational purposes only. It does not constitute financial, investment, legal, or tax advice, nor is it an offer or solicitation to buy, sell, or hold any digital asset. Crypto assets involve high volatility and risks, and their value can fluctuate greatly. Readers must be aware of and adhere to the relevant local laws and regulations concerning digital assets in their specific jurisdiction, as product availability may vary. All investment decisions must be based on your own research (DYOR) and risk assessment. Some content herein may be generated or assisted by artificial intelligence (AI) tools. The author and platform assume no liability for investment losses.