Woofun AI reports that Glassnode, written by CryptoVizArt, Frederik Theissen, and compiled by Luffy and Foresight News, identifies the cryptocurrency market as being in the advanced phases of bottom formation, yet critical confirmation signals for a sustained reversal remain conspicuously absent. The core thesis posits that while structural conditions for a market floor are present, the absence of definitive bullish triggers keeps the asset class in a state of precarious equilibrium. This divergence between underlying valuation metrics and surface-level price action suggests that the market is navigating a complex transition zone where bearish exhaustion is evident, but bullish conviction has not yet materialized. The analysis underscores that the current phase is characterized by a tug-of-war between deep undervaluation and persistent selling pressure from long-term holders, creating a scenario where the bottom is near but unconfirmed.

The macroeconomic backdrop has introduced significant volatility, driven primarily by a surge in crude oil prices that has rippled through global risk assets. Over the past seven trading days, WTI crude oil prices climbed by 7.9%, a sharp increase that intensified market anxiety. This spike was largely catalyzed by news regarding the expiration of the US-Iran understanding memorandum, an event that sent shockwaves through financial markets worldwide. Bitcoin, often viewed as a risk-on asset in this context, initially reacted with a peak weekly gain of 9.4% before retreating to a more modest 5% weekly increase. This volatility mirrors the broader equity markets, where the S&P 500 and European Stoxx indices both turned negative, with European stocks leading the decline among global risk assets. The synchronization between Bitcoin’s price movements and traditional risk assets highlights the extent to which macroeconomic pressures are dictating crypto market dynamics, overriding internal technical factors in the short term.

Structurally, the liquidity environment presents a paradoxical mix of bullish and bearish indicators, creating a fragmented landscape for investors. On one hand, the total amount of broad money M2 in the U.S. has reached an all-time high of $22.8 trillion, a metric that historically correlates with increased risk appetite and asset price appreciation.

However, this expansion is counterbalanced by the Federal Reserve’s ongoing balance sheet reduction, which stands $2 trillion lower than its peak in 2023. This quantitative tightening policy maintains real interest rates around 1%, thereby preserving a high opportunity cost for holding yield-free digital assets like Bitcoin. The coexistence of rising broad money and shrinking central bank balance sheets creates a hedged liquidity environment where neither clear easing nor severe tightening dominates, leaving the market in a state of uncertainty. This duality suggests that while monetary conditions are not overtly hostile, they are also not providing the supportive tailwinds necessary for a robust bull market launch.

From an on-chain perspective, Bitcoin has endured a prolonged period of severe undervaluation, with prices remaining below key cost benchmarks for five consecutive months. In the most recent week, Bitcoin rallied from $58,300 to $64,400, offering a glimpse of short-term recovery, yet it remains significantly below the true market average of $76,600 and the short-term holder cost line of $72,200. These levels serve as critical resistance zones; only a sustained break above them would signal an escape from the current undervalued range. Since early February 2026, Bitcoin has traded below both the active investor cost line and the break-even point for recent entrants, marking one of the longest discount periods in its history. This extended duration of undervaluation facilitates a transfer of holdings from weak hands to stronger ones, as new funds enter at prices below the cost basis of earlier buyers. While this turnover lays the groundwork for a cycle bottom, the possibility of a further pullback to $53,000 cannot be entirely dismissed, given the persistent downward pressure from external negative factors.

The primary source of this downward pressure stems from long-term holders who are executing stop-loss sales as their positions move deeper into the red. Relative indicators of profit and loss realizations reveal that the proportion of losses realized by long-term holders has surged from 15% at the beginning of February 2026 to 43% currently.

This shift indicates that long-term holders, many of whom entered the market near cycle highs, are losing confidence and exiting their positions collectively after months of significant pullbacks. The stop-loss selling generated by these deeply trapped investors has become the dominant bearish force, suppressing price rallies and preventing stabilization above current levels. This pattern explains why every upward move is met with concentrated selling, as holders seek to mitigate further losses rather than hold for a potential recovery. The collective exit of these long-term participants underscores the psychological toll of the prolonged bear market and highlights the difficulty of establishing a firm floor without their capitulation.

Woofun AI data shows that the intensity of this stop-loss selling has reached record levels, with daily loss realizations by long-term holders hitting $280 million, the highest since December 2022. This metric, which tracks losses from sales by users holding positions for over 155 days while excluding internal transfers, accurately reflects genuine stop-loss exits. The recent peak marks the second large-scale wave of stop-loss exits by long-term holders during this bear market, following an earlier wave that saw a temporary decline in selling pressure.

However, unlike the first wave, there are currently no signs of reduction in this latest surge of selling activity. The persistence of this high-volume loss realization suggests that the market has not yet cleared its selling pressure, and a clear downward trend in this indicator is a necessary precondition for a shift into a bull market. Until this pressure subsides, the market remains vulnerable to further downside, with the trend of this indicator serving as a crucial signal for determining the true bottom.

In the off-chain market, spot ETF flows reflect a similar narrative of slowing but persistent outflows, indicating that institutional demand has not yet stabilized. Since mid-May 2026, the 30-day moving average of ETF net flows has shown a monthly net outflow trend, with a daily outflow peak of $193 million at the beginning of June. Although this figure has since decreased to $88.9 million per day, the continued monthly net loss of funds suggests that institutional buying interest remains weak. The average daily trading volume of ETFs currently ranges between $650 million and $950 million, a level comparable to the fourth quarter of 2024 but approximately 80% lower than the peak daily average of $4.4 billion recorded in October 2025. This substantial gap in trading volume highlights the lack of robust institutional participation and suggests that ETF investors’ medium-to-long-term bullish confidence has not returned. Only when fund flows narrow to a balanced level and trading volumes increase simultaneously can a recovery in institutional demand be confirmed.

The derivatives market offers a contrasting perspective, with holdings shifting toward cautious optimism despite the prevailing bearish sentiment in spot markets. The ratio of outstanding put to call options has dropped to 0.56, the lowest level for 2026, indicating that there is one put option for every two call options in the market.

This shift was reinforced by options trading volume, which saw a sharp rise in put buying during recent price drops but quickly reversed as call orders flowed back in. The funding rate for perpetual contracts also supports this transition, having remained below the 0.01% bull/bear balance line for an extended period, far from the levels typical of a bullish-dominated market. The derivatives market has effectively cleared its bearish risks, moving away from the crowded short positions seen before previous sharp drops. This structural change suggests that while traders are cautious, they are increasingly positioning for a potential upside, albeit with significant hedging against downside risks.

Despite the bullish bias in holdings, the options volatility curve continues to price in substantial downward risk, reflecting a defensive posture among traders. The 25delta volatility skew indicator, which measures the premium for downward protection relative to upward returns, remains in a premium state across all maturity contracts. This premium reached 24% at the end of June, marking the strongest defensive sentiment among near-term contracts since the sharp drop in February. Every downward move in the market this year has pushed up this premium, indicating that traders are willing to pay extra for tools to hedge against declines. Even though the overall market positioning is bullish, the persistence of this defensive premium suggests that uncertainty and fear remain embedded in the options market. This divergence between holding structure and volatility pricing highlights the complexity of the current market environment, where optimism is tempered by a strong desire for protection.

Further complicating the picture is the deviation of the spot price from the maximum pain price level, a key metric in options market structure. Currently, Bitcoin’s spot price is approximately 6% below the overall market’s maximum pain price of $66,000. The maximum pain price represents the strike price at which the maximum amount of open interest will expire at zero, and prices tend to gravitate toward this level before expiration. While this week’s decline widened the gap between the spot price and the maximum pain price, the deviation is not as extreme as during the sharp drop in February, remaining within the middle of the 2026 price fluctuation range. Throughout the year, the maximum pain price has served as a central gravitational point for prices, with spot prices fluctuating around it with few long-term significant deviations. If prices can stabilize above $66,000, short-term market signals will turn optimistic; however, a further widening of this gap would reinforce the defensive trading sentiment in the options market.

The cost of hedging against sharp drops has also declined, providing another layer of nuance to the derivatives landscape. As the market rebounded slightly, the put side of the one-month volatility curve saw a general decline in pricing, with the implied volatility of put options 5% below the spot price dropping significantly. The lowest pricing points on the volatility curve were found in distant call options, suggesting that while defensive sentiment prevails, the absolute cost for traders to hedge against declines has decreased. This trend is even more evident over a longer time horizon, as the volatility premiums caused by extreme bearish hedging needs during the sharp drops in February and June gradually faded after July. The DVOL volatility index dropped to a 12-month low, indicating a period of low volatility. Although cautious sentiment still dominates the market, the declining hedging demand suggests that fear is subsiding, albeit slowly, and that the market is moving toward a more stable equilibrium.

In conclusion, Woofun AI analysis suggests that the convergence of on-chain, off-chain, and derivatives data paints a picture of a market in the late stages of a bear cycle, yet one that has not yet confirmed its bottom. The five-month period of severe undervaluation and the massive turnover of holdings among long-term holders indicate that the market is undergoing a significant structural shift.

However, the persistent stop-loss selling pressure, ongoing ETF outflows, and defensive options pricing suggest that key confirmation signals for a reversal are still missing. For the market to transition into a bull cycle, three conditions must be met: a continuous decline in stop-loss selling pressure from long-term holders, stabilization of institutional capital flows, and prices firmly stabilizing above the true market average. Until these conditions are satisfied, the market will likely remain in a state of cautious consolidation, with the probability of a bull market shift increasing only as these indicators align. This marks a critical juncture where patience and precise monitoring of these metrics will be essential for navigating the next phase of the cycle.