• Bitcoin is likely in a bear market, following its drop below $65,000, with the Short-Term Holder cost basis falling below the True Market Mean.
• Daily realized losses have surged to $1.35 billion, including roughly $770 million from long-term holders, signaling growing investor capitulation.
• Spot market conditions have deteriorated, with negative Spot Volume Delta showing that selling activity continues to outweigh buying demand.

Bitcoin (BTC) dipped further below $65,000 on Wednesday, with onchain data from Glassnode signaling a market firmly in a bear phase. The decline has pushed prices back into a key valuation range between the Realized Price and the True Market Mean.

Glassnode noted that a key shift in market structure has also emerged. The Short-Term Holder (STH) cost basis has now fallen below the True Market Mean for the first time since January 2022, signaling weaker conviction among newer investors.

"This configuration indicates that new buyers are accumulating below the market's key mean valuation level, a hallmark of a later-stage bear market where the time component of the drawdown begins to bear down on investor conviction," Glassnode wrote.

Bitcoin profitability metrics signal growing capitulation

Profitability metrics have also deteriorated, with the 7-day average of the Realized Profit/Loss Ratio dropping from 3.16 to 0.29, reflecting a rapid shift from profit-taking to loss realization. 

At the same time, daily realized losses have surged to $1.35 billion, with long-term holders accounting for roughly $770 million as they exit positions accumulated near previous cycle highs.

"As the bear market matures, this pattern of long-term holder capitulation passing supply into new hands at lower prices is a recurring and necessary feature of cycle bottoming processes, though the current pace of loss realization suggests that process remains incomplete," the report stated.

ETF outflows and weak spot demand add to downside pressure

Bitcoin's recent attempt at a recovery also met strong resistance near $83,000, a level that aligns with the aggregate cost basis of US spot Bitcoin ETFs. This level has now become a key overhead barrier, leaving many ETF holders at a loss.

The failed recovery coincided with roughly $4.21 billion in ETF outflows over the past three weeks, marking the largest streak of redemptions so far this year and pointing to reduced institutional appetite.

Glassnode further signaled weakened spot market conditions alongside price. The 7-day Spot Volume Delta has turned firmly negative, indicating that sellers are dominating trading activity following the failed breakout.

"Persistent negative Spot Volume Delta tends to accompany either capitulation events or the early stages of a broader trend reversal," Glassnode added.

In derivatives markets, positioning reflects caution but not outright panic. Implied volatility continues to trend lower, even as the volatility risk premium rises toward three-month highs. This suggests options traders expect larger price moves ahead despite recent calm conditions.

Broader macro conditions are adding to the pressure. Rising US Treasury yields, expectations of further Federal Reserve tightening, and a stronger US dollar have tightened financial conditions. Glassnode further stated that Bitcoin has been more sensitive to these headwinds than other risk assets in the current environment.

BTC is trading at $64,879, down 3.9% at publication time, with weekly declines stretching over 13%.