Bitcoin (BTC) remains in a technically critical zone controlled by short-term holders despite its recovery to nearly $98,000

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.

According to a May 7 analysis by Glassnode, despite recovering to nearly $98,000, Bitcoin (BTC) remains in a technically critical zone that is heavily concentrated among short-term holders (STHs).

This period has seen improved capital inflows and investor sentiment, but the current price structure remains vulnerable if key support levels fail.

Bitcoin price surges to seven-week highs

As highlighted by Glassnode, recent price action has seen Bitcoin surge to highs last seen over two months ago, briefly touching $97,900. This move also pushed the bulk of coins out of a loss-making state.

Specifically, more than 3 million BTC returned to a profitable state following the apex of 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 cost-basis levels such as the 111-day moving average and the Short-Term Holder realized price.

The analysis 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 the original acquisition price of coins.

This statistic suggests that more value is entering the network, which may indicate that new investors are accumulating coins at higher price ranges compared to the average cost basis.

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

According to CryptoSlate data, Bitcoin was trading at $96,844 at the time of writing, 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 these holdings. Glassnode reported that STHs concentrate 83% of coins in unrealized loss, many of whom entered the market above $96,000.

These investors were previously subject to elevated financial stress, with unrealized losses breaching alarming levels earlier this year. However, that stress has since subsided, with the STH unrealized loss metric returning 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.

Overall investor activity has also picked up. Combining realized profit and loss volumes yields a daily figure of over $1 billion, 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 returning. 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.

Despite rally, volatility expectations decline

Despite the rally and renewed capital movement, volatility expectations in derivatives markets are declining.

One-week and one-month at-the-money implied volatility is now at its lowest since July 2024, while longer-dated contracts show similar compression. Implied volatility premiums on contracts expiring in May through March 2026 have all trended downward.

Even long-term options are 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