Glassnode: Has the sentiment in the crypto market completely changed?

The market is at a decision point, and the key level to follow is the cost basis of short-term holders, which can often outline the bullish and bearish market structure.

Written by: Glassnode

Compiled by: Wuzhu, Jinsuo Caijing

Summary

Due to the optimistic sentiment regarding the potential easing of the US-China tariff tensions, the price of Bitcoin surged to $94,700. The price briefly recovered the cost basis for short-term holders, which is a key midpoint that distinguishes between bear and bull market phases.

The profit supply percentage has risen from 82.7% during the last time BTC traded at a similar price level to 87.3%. This indicates that nearly 5% of the supply changed hands during the recent adjustment.

The STH profit and loss ratio has reached 1.0, indicating that many recent buyers are at break-even, a level often associated with exit risk. Realized profits have also significantly increased, mainly driven by short-term investors locking in gains.

The number of open contracts in futures increased by 15.6%. However, despite the market trading higher, the financing rate has turned negative, indicating an increase in short interest.

On April 22, the net inflow amount of the U.S. spot Bitcoin ETF reached a record high of $1.54 billion, indicating a massive influx of institutional demand. Standardized flow data shows that BTC demand through ETFs far exceeds ETH demand, which helps explain Ethereum's relatively poor performance.

After weeks of sluggish activity and lower liquidity conditions, the market has finally responded positively to broader macro catalysts. Following optimistic signals from the U.S. government regarding the reduction of tariffs on Chinese imports, both the stock and cryptocurrency markets have seen a rise.

In terms of Bitcoin, this rebound briefly broke through a key on-chain threshold: the cost basis of short-term holders (STH). This model reflects the average acquisition price of market participants who recently purchased tokens and typically serves as a critical pivot level. Historically, sustained breaks above this price model mark the transition between a bearish correction period and a recovery phase characterized by renewed bullish sentiment.

However, similar to the situation during July to September 2024, this initiative has so far only resulted in a temporary recovery of the STH cost basis. This indicates that bullish sentiment is beginning to emerge, but it has not yet confirmed that the market has fully turned bullish. As more investors return to meaningful unrealized investments, sustained strength above this level could bolster market confidence.

The market has recently risen to $94,300, and at the same time, the unrealized profits held by investors have also significantly rebounded. The profit supply percentage indicator has risen to 87.3%, marking a substantial rebound from the low point in March.

When the last trading price of Bitcoin was around $94,000, only 82.7% of the supply was profitable. This means that since the beginning of March, as the market consolidated and fell, nearly 5% of the circulating supply changed hands at lower prices.

Historically, a typical excitement phase often follows this indicator stabilizing above 90% for an extended period, indicating widespread profitability and increased investor confidence.

Another indicator that Bitcoin has returned to a critical decision area is the STH supply profit and loss ratio, which has recently surged to around the neutral level of 1.0. This indicates that short-term supply is more evenly distributed between profits and losses among the tokens, resulting in a more balanced sentiment within this group.

This structure is very important. In the previous bear market, the STH-P/L ratio traded well below 1, and this level acted as a resistance ceiling. Whenever this indicator retests 1.0 from below, it is often associated with the formation of local tops, as investors start to exit their positions and suppress momentum.

If the market can convincingly recover this level and trade above 1.0, it will be a stronger signal of recovery. Monitoring the trading situation of this ratio in the coming weeks, especially in conjunction with realized profit-taking behavior, can help determine whether the market is re-establishing a more constructive recovery from this adjustment.

Profit Taking Pressure Test

We now have a market framework at a decision point, and profit-taking behavior has become a key signal that needs to be monitored. Currently, the total realized profit of the hourly solution has soared to $139.9 million/hour, approximately 17% higher than its benchmark of $120 million/hour.

This rise indicates that many market participants are taking advantage of this rebound to lock in profits. If the market can absorb this selling pressure without collapsing, then the future will be brighter.

On the contrary, if these levels are not maintained in the event of realizing substantial profits, this move could be marked as another dead cat bounce, consistent with the relief bounces that faded under similar conditions before.

Who is making a profit?

In addition to the amount of realized profits, understanding which groups are generating profits can provide deeper insights into market sentiment. To this end, we adopted the spent output profit ratio (SOPR)—a metric that compares the selling price of tokens with their original cost basis, offering a perspective on the average profit or loss multiples locked in by investors.

The Short-Term Holder's SOPR (STH-SOPR) shows that during the recent rise, recent buyers were the main group locking in profits.

This is the first significant breakthrough of STH-SOPR above the breakeven level of 1.0 since the end of February, and it is another relatively positive signal for investors returning to profitability. Overall, trading above 1.0 for STH-SOPR is characteristic of a bullish upward trend.

Short Perpetual Options

Although some spot holders seem to be locking in profits, perpetual swap traders tend to short during the rebound. The open interest of perpetual swap contracts has significantly risen to 281k BTC, up about 15.6% since the low of 243k BTC set in early March.

This reflects the increase in leverage in the derivatives market, which often exacerbates market volatility if prices begin to touch traders' stop-loss or liquidation areas.

Interestingly, the surge in open interest coincides with a decline in the average funding rate, which has plummeted to -0.023%. This indicates a growing tendency for short positions, suggesting that many traders are betting on a rebound, possibly believing that the recent trend has been excessive.

If the upward momentum continues, the divergence between the increase in open interest and the negative capital inflow will lay the foundation for a potential short squeeze situation.

However, when narrowing the scope to assess the long-term sentiment of perpetual swap traders, the situation becomes more cautious. The 7-day moving average of long positions' hourly funding rate has steadily declined and is currently at $88,000 per hour, still showing a downward trend.

This indicator serves as a measure of the willingness for sustained long exposure, reflecting the dollar value paid by traders on the market "consensus" side. The current downward trend in premiums indicates that most positions are indeed shifting towards bearish, creating an incentive for market makers to take long positions to earn financing interest.

Institutional Interests

ETF flows have become an important indicator of institutional investor sentiment and demand during this cycle. Tracking the inflows and outflows of ETF products can provide a unique perspective on the beliefs and participation of large capital allocators.

During the recent rise of Bitcoin to $94,000, the daily net inflow of the U.S. spot Bitcoin ETF reached an astonishing $1.54 billion, one of the highest daily net inflows since its inception. This influx sends a strong signal that demand for Bitcoin may be beginning to recover.

Is it still Bitcoin season?

Despite the strong rebound in Bitcoin prices, many are questioning why Ethereum has not experienced a similar magnitude of rebound. One answer lies in the comparison of ETF flows, which we normalize and adjust based on the relative spot trading volumes of each asset.

In the past two weeks, Bitcoin ETFs have seen two significant waves of inflows, each exceeding 10% of BTC spot trading volume, highlighting the relatively strong institutional demand.

In contrast, the inflow of Ethereum ETFs remains quite sluggish, accounting for less than 1% of the ETH spot trading volume. This stark difference highlights the disparity in institutional demand between the two assets, which may be one reason why ETH has consistently underperformed BTC recently.

Conclusion

The price of Bitcoin has rebounded to over $94,000, reflecting a shift in macro optimism and investor sentiment. Positive signals surrounding US-China tariffs have triggered a rebound, recovering the cost basis for short-term holders and raising the profit supply percentage to 87.3%. Multiple indicators suggest that Bitcoin is experiencing a positive recovery, while signs of a short squeeze are also emerging in the futures market.

Institutional demand for Bitcoin may be returning, with Bitcoin ETF net inflows reaching $1.54 billion in a single day. The market is at a decision point, and the key level to follow is the cost basis of short-term holders, which often outlines the bullish and bearish market structure. Bulls need to push the market to break through this price model and hold above this level.