ETF funds are beginning to flow back, what is BTC missing to truly recover?

Null

Author: Glassnode

Compiled by: AididiaoJP, Foresight News

Bitcoin has stabilized around $70,000 with improved capital flows and easing seller pressure. However, spot trading volume remains low, and supply pressure above the market indicates that stronger demand is still needed to sustain a lasting recovery.

Summary

After a sharp sell-off that pushed Bitcoin down to about $67,000, it has gradually stabilized and rebounded near $70,000, but the upward momentum remains hesitant.

Unrealized losses have increased but are still within normal historical ranges, suggesting market pressure exists but not full capitulation.

A large portion of short-term holders’ supply is concentrated between approximately $93,000 and $97,000, forming a key resistance zone above current prices.

Realized losses remain high but show no signs of panic, indicating the current phase is orderly risk reduction rather than frantic selling.

Spot trading volume stays subdued, with no significant increase during the price rebound, reflecting a lack of market confidence and mainly selective bottom-fishing behavior.

Funds in US spot ETFs have shifted from continuous net outflows to slight net inflows, indicating institutional investors may be beginning to re-enter.

Perpetual contract funding rates remain negative, signaling persistent bearish sentiment and cautious derivative positioning.

Open interest in futures remains relatively low, suggesting limited leverage expansion supporting this rebound.

Options market skew indicators are stabilizing, with implied volatility fluctuating within a range, indicating reduced demand for downside hedging.

Market makers’ Gamma positions have slightly turned positive, showing improved liquidity and a more balanced market structure.

On-Chain Insights

Higher lows, heavy overhead resistance

Despite ongoing geopolitical tensions affecting stocks, energy, and commodities, Bitcoin has been making higher highs and higher lows since early March, forming a constructive structure within the $60,000–$70,000 range.

If this resilience continues, it could lay a relatively solid foundation for a long-term upward trend. The recent supply distribution heatmap of short-term holders’ cost basis highlights recent supply zones, helping identify potential supply and demand levels from new entrants.

Within the current price range, new accumulation zones are gradually forming, though modest in size, enough to explain some recent upward momentum. However, a more significant risk exists above $84,000, where a large supply of short-term holders could amplify selling pressure if prices reach or revisit that level.

Medium-term Range

Building on the supply dynamics, realized price decomposition by holding period offers a more detailed view of investor behavior. This metric tracks the average purchase price of tokens held for different durations, helping identify support and resistance levels from a behavioral perspective.

Currently, holders with 1 week to 1 month of holding period have a cost basis around $70,200, forming a support zone; those holding 1 to 3 months have a cost basis near $82,200, reinforcing the resistance above.

Overall, these two levels define the most probable medium-term trading range. However, given the limited size of current accumulation zones, the support at $70,200 needs to be tested; a break below could signal further downside risk.

Fear intensifies, but not capitulation

Extending from the detailed cost basis metrics, profit and loss indicators provide a macro view of market sentiment by examining the balance between greed and fear. The unrealized loss ratio—total unrealized losses relative to market cap—is a key indicator of potential selling pressure and overall market mood.

Over the past two months, this indicator has remained above 15% of market cap, similar to levels seen in Q2 2022. This suggests high fear levels but not full capitulation comparable to extreme events like the FTX collapse. Historically, unwinding current unrealized losses typically takes time, further price adjustments, or both. While a quick V-shaped reversal is possible, it would require sustained and strong inflows of new capital in the short term.

Profit Flow Deterioration

Against the backdrop of rising unrealized fear, realized profits have been shrinking significantly since Q4 2025, confirming demand weakness.

Adjusted realized profits (smoothed with a 7-day simple moving average, excluding exchange internal transfers) now stand below $10 million daily, down over 96% from a peak of about $3 billion in July 2025. Such a sharp contraction is typical of late-stage bear markets, where profit-taking sellers have largely exited, and on-chain liquidity hits cyclical lows. While this environment reduces short-term selling pressure, it also indicates a lack of fresh capital inflows needed to sustain market recovery.

Off-Chain Insights

Spot Volume Remains Low

After prices plunged to around $67,000, overall spot market activity stayed muted. During the subsequent rebound, major exchanges saw only modest volume increases. Occasional short-lived spikes mostly reflect passive reactions rather than sustained confidence-driven buying.

Compared to the more active participation during previous upward moves, current spot volume remains weak. This suggests the recent rally relies mainly on some funds buying the dip and short-term position adjustments, without broad-based demand support.

The divergence between a stabilizing price trend and low spot activity indicates ongoing market rebalancing. Until spot trading expands more consistently, the upward momentum may remain fragile, with derivative flows and liquidity conditions exerting greater influence than organic accumulation.

Exchange Fund Flows Rebound

After a prolonged period of net outflows, US spot ETF fund flows have recently shown signs of improvement, with the 7-day moving average turning slightly positive. This suggests that, following the dip to $67,000 and subsequent stabilization, institutional demand may be gradually returning.

While the scale of inflows remains limited compared to previous accumulation phases, the directional shift is noteworthy. Prior net outflows coincided with weak prices and low market sentiment, whereas recent inflows hint at cautious re-engagement by traditional market participants.

This shift is significant because ETF demand has become a key support for spot markets in this cycle. Sustained net inflows could help restore institutional confidence and encourage increased exposure.

Overall, the recovery remains early and modest, but the change in fund flows signals a positive shift in market structure compared to the recent persistent outflows.

Persistent Negative Funding Rates

Despite Bitcoin’s stabilization and partial recovery from recent dips, perpetual contract funding rates remain in negative territory. This indicates that short positions still dominate, with traders willing to pay funding costs to maintain downside exposure.

Continued negative rates reflect cautious derivative market sentiment. Even as price structures improve, traders show little enthusiasm for rebuilding long positions. Unlike previous recovery phases where funding rates normalized or turned positive with sentiment, current conditions suggest ongoing risk aversion.

Persistent negative funding rates may also act as a potential upside driver if they lead to short covering, but they also highlight lingering market skepticism, especially among leveraged traders.

Overall, derivative positioning remains defensive, with spot and ETF flows showing some stabilization but overall risk appetite still leaning bearish.

At-the-Money Implied Volatility: Rangebound, Awaiting Direction

In the options market, at-the-money implied volatility (IV) exhibits similar characteristics to spot, remaining range-bound with mean reversion tendencies. The front end of the volatility curve reacts most strongly to macro events and short-term news. One-week implied volatility is relatively volatile but remains within a narrow 50–60% range. Longer-dated implied volatility stays below 50%, with limited differences across maturities.

The overall low IV level indicates the market is waiting for new catalysts to reprice two-way risks. Long-term implied volatility remains subdued, suggesting no structural change in long-term risk expectations. Short-term volatility is mainly driven by near-term trading activity, with options primarily used to hedge short-term uncertainty rather than express directional views.

25 Delta Skew: Downside protection dominates

During the recent brief spike in volatility, the 25 delta skew widened toward puts, confirming that the volatility reprice was mainly driven by demand for downside protection.

When Bitcoin fell below $68,000 earlier this week, the 1-week and 1-month skew rose to 18–19%, clearly indicating increased demand for short-term downside hedges amid geopolitical uncertainty.

Subsequently, the skew has receded but remains elevated, with levels around 10–12%. The convergence of skew across maturities suggests that market participants’ demand for downside protection is not limited to near-term options but reflects a broader risk-averse stance.

Skew Indexes Show Different Biases

The skew index offers another perspective on options market sentiment. Unlike 25 delta skew, this index weights low delta options more heavily, capturing tail risk pricing more comprehensively. Currently, the 1-week and 1-month skew indexes remain in the put-biased zone, while the 3- and 6-month indexes (around 2.4% and 7.4%) have shifted into the call-biased zone (calculated as call minus put).

This divergence indicates a nuanced market outlook: short-term options show a clear put bias, while longer-term implied tail risks are priced more evenly or slightly favor upside. This pattern suggests that, although near-term downside protection is in demand, the longer-term market structure is more balanced or even slightly optimistic, a common feature in crypto markets where participants seek asymmetric upside via deep out-of-the-money calls.

Market Maker Gamma: Expiry Will Reset Market Structure

Friday, March 27, marks the expiration of weekly, monthly, and quarterly options, often causing significant price impacts. As options markets grow, market maker hedging activity increasingly influences short-term price movements. Currently, with less than 48 hours to expiry, market makers are generally in short Gamma positions, with risk concentrated between $70,000 and $75,000. In this zone, especially with lower liquidity, prices could experience accelerated two-way volatility.

Notably, about $10 billion of short Gamma positions are nearing settlement, removing a key mechanical driver of price. Once these positions are closed, the market’s hedge-driven responsiveness should diminish, making prices more sensitive to external factors. In this context, macro developments could become the primary influence on Bitcoin’s next equilibrium.

Conclusion

After a significant correction, Bitcoin shows some positive signs: stabilization of prices, improved ETF fund flows, and a less one-sided derivative market structure. The recent selling pressure appears to be easing, and the market is becoming more balanced compared to a week ago.

However, the environment is not yet conducive to a decisive bullish breakout. Spot volume remains low, open interest has not expanded significantly, and overhead supply persists. Overall, the market is in recovery, but stronger participation and sustained capital inflows are needed to confirm a durable uptrend. The current structure is constructive but not yet clearly bullish. Continued demand recovery and increased trading activity are essential for the next phase of a genuine rally.