Bitcoin (BTC) remains in a technically critical zone controlled by short-term holders despite its recovery to nearly $98,000, which has eased financial stress across the network, according to a May 7 report by Glassnode.

The report highlighted recent market behavior pointing to improved capital inflows and investor sentiment. Additionally, it warned that the current price structure remains vulnerable if key support levels fail.

Bitcoin surged to $97,900 last week, marking its highest level over two months. The move temporarily alleviated underwater positions, with more than 3 million BTC returning to a profitable state after its correction to a low of roughly $74,000 in April. 

However, the market remains in a decision phase as it waits to see whether Bitcoin can consolidate above key cost-basis levels such as the 111-day moving average and the Short-Term Holder realized price.

The report noted that the recent rally has pushed Bitcoin’s realized cap to an all-time high of $889 billion, up 2.1% over the past month. Realized cap is a metric that measures cumulative capital inflows based on acquisition price, suggesting that more value is entering the network. 

Concurrently, realized profits have exceeded $1 billion per day, indicating strong demand capable of absorbing profit-taking activity from recent buyers.

According to CryptoSlate data, Bitcoin was trading at $96,844 as of press time, up 2.64% over the past 24 hours.

Short-term holders key as ETF demand recovers

While the number of coins held at a loss has dropped to 1.9 million BTC, recent buyers still represent the bulk of those holdings. Glassnode reported that short-term holders (STHs) concentrate 83% of coins in unrealized loss, many of whom entered the market above $96,000. 

These investors were previously under elevated stress, with unrealized losses breaching alarming levels earlier this year. That stress has since subsided, with the STH unrealized loss metric reverting to neutral territory, suggesting that most of these addresses are closer to breakeven.

This transition has also influenced spending behavior, with STHs increasingly realizing gains rather than losses. According to the report, this shift may mark a pivot point, indicating that the cohort is regaining confidence and selectively de-risking.

Investor activity has also picked up broadly. Combined realized profit and loss volumes have reached $1 billion per day, a level only exceeded during 15% of trading sessions in this cycle. 

The uptick indicates renewed market engagement, but the report cautioned that much of this behavior may still be reactive to short-term price moves rather than driven by long-term conviction.

Institutional interest, which had waned during recent months, appears to be rebounding. US spot Bitcoin exchange-traded funds (ETFs) have absorbed over $4.6 billion in inflows across the last two weeks, offsetting the 70,000 BTC in net outflows recorded during the previous drawdown. 

Total assets under management within US ETFs now stand at 1.171 million BTC, just 11,000 BTC short of the all-time high earlier this year. 

According to the report, the recovery in ETF demand is a constructive signal that institutional allocators are starting to rotate capital into Bitcoin again after a period of caution. The inflows coincide with the broader uptick in market liquidity and capital deployment observed on-chain.

Volatility potentially underpriced

Despite the rally and renewed capital movement, volatility expectations in derivatives markets are declining. One-week and one-month at-the-money implied volatility are now at their lowest since July 2024, with longer-dated contracts showing similar compression. 

Implied volatility premiums on contracts expiring in May through March 2026 have all trended downward, with even long-term options pricing in relatively low expectations for price swings.

The report viewed this subdued volatility regime as a potential counter-indicator, especially given the market’s proximity to dense cost-basis clusters between $94,000 and $96,000. The Realized Supply Density metric, which measures the acquisition volume of BTC near the current price, has increased meaningfully. 

This concentration implies that even small price fluctuations could have amplified effects on investor behavior, particularly among those who bought during the December–February consolidation range.

While the recent rally has improved network-wide profitability and market structure, Bitcoin’s position near critical support and resistance levels means further gains are not guaranteed. It will test the current market strength if BTC fails to hold above its short-term cost basis and moving averages.

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