Bitcoin Shows Signs of Recovery Amid Weak Spot Demand

Signs of recovery have emerged for Bitcoin, which recently experienced a decline from $74,000. However, Glassnode has indicated that the underlying factors supporting this recovery do not fully signal a strong bullish turnaround. Their latest Weekly Market Pulse report, published on March 9, highlights a market that is gradually showing improvement, yet spot demand and overall market confidence remain at low levels.

According to Glassnode, while there are positive developments, caution is still warranted. They reported that ETF activity is one area where strength is evident, noting an increase in net inflows and trading volumes. Nevertheless, they pointed out that capital flows are still weak, which contributes to a market environment that feels more fragile than robust. This duality remains at the heart of their analysis.

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Spot market conditions illustrate this fragility clearly. The 14-day Relative Strength Index (RSI) increased slightly from 45.2 to 47.7, suggesting a modest uptick in buyer interest without signaling an overheated market. In contrast, spot Cumulative Volume Delta (CVD) plunged from negative $84.4 million to negative $97.6 million, revealing increased selling pressure. Additionally, spot trading volume declined from $9.8 billion to $9.1 billion, indicating a lack of urgency among participants as they await stronger market cues.

In the derivatives market, the situation is more complex. Futures open interest rose by 5.1% to reach $29.4 billion, signaling a return of leverage and speculative trading activity, while perpetual CVD saw a notable increase of 201.7% to $172.6 million, indicating an uptick in buy-side engagement in leveraged markets. Despite this, funding rates dropped sharply, reaching negative $391.7K, indicating a stronger demand for short positions. This suggests that while leveraged traders are active, there is a lack of consensus on market direction.

Conversely, options markets suggest a less defensive stance among investors. The open interest surged from $32.8 billion to $34.1 billion, and the volatility spread narrowed, signaling a reduction in fear and a more balanced stance in options positioning compared to the previous week.

While the US spot ETF sector remains a bright spot, with weekly net inflows climbing from $776 million to $934 million and trading volume increasing significantly, caution still prevails. The ETF MVRV metric declined from 1.07 to negative 0.53, indicating that many ETF holders are now at a loss, which reflects capitulation-like conditions. This suggests that, despite new institutional interest, existing positions are under pressure.

On-chain metrics support the narrative of stabilization, yet lack heat. Active addresses decreased by 2.0% to 649.3K, and fee-related volumes fell by 5.1% to $170.5K. Conversely, transfer volume increased by 23.7% to $5.9 billion. Changes in the realized market capitalization also hinted at a reduction in outflows, although the proportion of active, speculative capital remains low.

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Profitability metrics have seen slight improvements, with the percentage of supply in profit rising to 56.8% and the Net Unrealized Profit Loss (NUPL) moving from negative 31.9% to negative 26.7%. These metrics indicate some alleviation of the pressures experienced during Bitcoin’s recent downturn.

Ultimately, Glassnode emphasizes that while Bitcoin’s market structure appears more stable than in previous weeks, a significant resurgence in spot demand is crucial for the recovery to transition from tentative to truly convincing.

As of the latest update, Bitcoin’s price stands at $70,755.