Key Points
- Bitcoin’s maximum drawdown of 26% during the current bull market is shallower than typical, demonstrating resilience and consistency with past bull cycles.
- Despite increasing speculation in futures markets, the Short-Term Holder cost basis of $62,500 remains a critical level for near-term market sentiment.
Market Demonstrates Bull Cycle Resilience
The latest research from Glassnode reveals that Bitcoin’s recent market corrections, while significant, are relatively shallow and consistent with historical bull market trends. This finding suggests a robust underlying strength in the current crypto bull cycle.
According to the report, the maximum drawdown in the 2023-24 period has been 26% on a closing basis, which is somewhat shallower than typically observed in previous uptrend cycles. This data point highlights both the similarities to past bull markets and the relative resiliency of the current cycle.
“When we evaluate the depth of corrections measured from the local high during bull markets, the 2023-24 drawdown profile is largely in line with previous uptrend cycles,” the Glassnode researchers note. “We can also see a relatively high degree of resiliency on the demand side.”
Short-Term Holders: A Barometer for Near-Term Price Action
The report emphasizes the importance of Short-Term Holders (STH) in understanding near-term price movements. The STH cost basis, currently at $62,500, is identified as a critical level for market sentiment. The spot price has recently accelerated above this threshold, which Glassnode interprets as a constructive sign for the market.
“If the market fails to hold above this level, however, it will put a large cohort of recent buyers under increasing pressure, especially considering the last few months of challenging conditions,” the report states.
The analysis also reveals that the balance of STH supply held in profit versus loss has improved, with the ratio trading at 1.2. This indicator has broken more than one standard deviation above its 90-day mean, suggesting a potential positive shift in investor sentiment.
Futures Market Speculation on the Rise
While the spot market shows signs of resilience, the derivatives market paints a more complex picture. The report highlights a significant $2.5 billion of futures open interest that was forcibly closed during the recent rally, indicating a flush-out of short sellers.
However, Glassnode warns that a substantial amount of open interest remains in the market. “The market remains somewhat susceptible to heightened volatility in either direction, which could squeeze leveraged traders out of their positions,” the researchers caution.
The total cost of leverage has declined from peaks of around $120 million per week during the March all-time high to just $15.3 million per week recently. Despite this reduction, the directional premium has recently exceeded its statistical upper band, potentially signaling a return of speculative interest.
As the crypto market continues its bull run, Bitcoin’s ability to maintain shallow drawdowns while managing the delicate balance between spot market resilience and derivatives market speculation will be crucial for sustained growth.
