[Analysis] Bitcoin enters loss zone for short-term holders… On-chain and derivatives indicators all 'downside caution'

Bitcoin (BTC) has fallen below the average purchase price of short-term holders, signaling growing market-wide risk-aversion, analysts said. On-chain and derivatives indicators also show a clear adjustment flow mindful of downside risk.

On the 20th (local time), on-chain analysis firm Glassnode reported that Bitcoin recently dropped to 89,000 dollars, breaking below the short-term holder cost basis of 109,500 dollars. The price also breached the roughly 95,400-dollar 1 standard deviation band, indicating that recent buying pressure as a whole has entered loss territory.

The market expects this zone could act as short-term resistance. Glassnode said, "Recovery to the 95,000-dollar range would be needed for the market structure to show signs of regaining balance."

Alongside on-chain metrics, derivatives indicators are turning conservative. Bitcoin open interest has been declining recently, and perpetual futures (funding rate) have fallen to periodic low levels. The funding rate is an adjustment cost both sides pay to balance long and short positions in the futures market; a lower rate is interpreted as a signal of weaker overall leverage demand in the market.

The options market also shows strengthened downside-hedging tendencies. The volatility indicator (IV) rose across pre-expiry tenors, and as put option demand increased at major strike prices, skew (the difference between put and call option prices) remained in negative territory. This means market participants are increasing positions to guard against short-term downside risk.

Glassnode analyzed, "A put-centric flow and volatility expansion reflect expectations of increased short-term volatility," adding, "Whether short-term holders recover to their cost basis will be a key variable in judging future direction."