Bitcoin’s Rally Cools as Traders Hedge the Heat

Market Overview - Bitcoin (BTC) has seen a slowdown in momentum after reaching a record high, currently trading above $111,000, up 2% over the last week, but down from a recent peak of over $126,000 [1] - The market is experiencing capital rotation from spot markets to derivatives, with volatility becoming the main traded asset [2][6] Market Sentiment - Glassnode indicates that repeated breakdowns below key quantiles suggest market exhaustion, while CryptoQuant notes shrinking realized profits and drained exchange inflows [2] - Short-term holders' cost basis is around $113,000, which is critical for determining market strength; falling below this level could lead to losses for recent buyers [3] Selling Pressure - Long-term holders have been selling at a rate exceeding 22,000 BTC per day since July, contributing to a lack of momentum and hindering recovery efforts [4] - ETF inflows have cooled, and exchange reserves are rising, indicating that traders are preparing to sell rather than accumulate [5] Capital Rotation - The current market dynamics reflect a rotation of capital within crypto, with liquidity moving towards futures and options markets where volatility premiums have increased [6] - Market makers are hedging to maintain delta neutrality, which is smoothing short-term price action and capping rallies due to elevated volatility and heavy put demand [7]