Bitcoin's Shallowest Bear Market: Market Silence, Spot Volume Hits New Low Since 2019

Spot volume has hit a new low since 2019, with ETF and exchange liquidity coming to a complete halt: Bitcoin is being "paid to wait".

Written by: glassnode
Compiled by: AididiaoJP, Foresight News

The yield on government bonds has only surpassed crypto arbitrage trading for the second time, leading the downstream market into silence: spot trading volume has reached its lowest since 2019, with exchange capital flows nearly stagnant and sell orders on the order book significantly thinning. This round of pullback is extremely shallow, and its duration has yet to catch up with previous bear market timelines.

Summary

• The bond market has stopped pricing in rate cuts and is now pricing in rate hikes.
• Government bond yields have surpassed crypto arbitrage trading, explaining why marginal buyers are choosing to park their funds in cash.
• The spot market is sitting on the heaviest cost basis shelf on the chart, with a breakeven line at $69,000 above.
• In terms of depth, this is the shallowest bear market on record, and its duration has not yet reached the levels of previous cycles.
• Exchange capital flows, spot trading volume, and ETF buying have all fallen silent in unison.
• Hedge positions were sold at the rebound peak and have begun to flow back within a week.
• Buy orders are waiting far below the spot price, while sell orders have thinned out. The vector reading is Risk Off.

Macro Insights

Leading Advantage Handed Back

Last week, Bitcoin outperformed stock indices, absorbing the oil shock (the stock market barely moved), and both closed higher. This relative strength has faded this week. Bitcoin has declined throughout the week, while US and European stock markets have remained stagnant, with a turning point occurring on Monday: since that trading day, Bitcoin has not been aligned with the stock market. Oil has also given back last week's gains, becoming the weakest performer among the four.

A week of relative weakness does not constitute a regime shift. However, it has taken away one of the few supports from the June recovery, when Bitcoin was still being bought during the days of no movement in stock indices.

Bond Market Pricing for Rate Hikes

The FOMC is making decisions today, while the bond market has already made up its mind. The 2-year Treasury yield (the cleanest read on policy path) has been above the federal funds rate since April, with the gap being the widest since November 2022. This is not pricing in rate cuts; it leans towards the next move being a rate hike.

If a rate cut occurs today, it would catch most positions off guard and aligns naturally with the moderate core inflation data mentioned in last week's report. The market's reaction is more important than the decision itself: if unexpected good news cannot hold the buy orders, it indicates the absence of marginal buyers rather than the decision itself.

Where Have the Buy Orders Gone?

The US dollar has continued to strengthen since May, and Bitcoin's digestion of this round of dollar appreciation is nearly the worst on record. In typical precedents since 2015, Bitcoin has risen at this stage. This time, however, it is mired in negative returns, with only 3 out of the past 20 similar increases being worse.

The second channel is more mechanical. The three-month futures basis (anchoring the cash arbitrage trading yield for institutions participating in the crypto market) has been below the 2-year Treasury yield since February. Historically, only one period has lasted this long— from August 2022 to January 2023, ending at the cycle bottom.

When Treasury yields exceed the basis, those providing leverage, depth, and volume to the market have little reason to stay here. Many phenomena in the subsequent off-chain section can be traced back to this price difference.

On-Chain Insights

Standing on the Heaviest Shelf

Bitcoin is trading within the heaviest single cluster on the cost basis distribution chart—approximately between $62,000 and $68,000, where the volume of coins traded exceeds any other position on the chart. This range is almost evenly split. Half belongs to short-term holders who bought during this year's decline; the other half belongs to long-term holders who have held through.

The half belonging to long-term holders is patient supply, typically acting like a floor. The half belonging to short-term holders is more sensitive, and most are in a state of unrealized losses, thus often being the first to move supply during rebounds. Above, the cost basis for short-term holders is at $69,000, which remains the key line determining the next leg of the market; the real supply wall above is the barrier of long-term holders between $83,000 and $86,000.

Shallow Magnitude, Time Not Yet Up

The conclusions of the two indicators measuring this bear market are consistent. Relative to the 200-day moving average, no previous bear market has pressed prices so close to the trend: the deepest discount of this cycle is still far less than the depth of previous mild bear markets. In terms of historical peak retracement magnitude, the picture is similar—previous bear market bottoms were far below the trading range of this cycle to date.

Looking at the 200-day perspective, time is another half of the story. Bitcoin has spent about three-quarters of the duration below this moving average, while most of those bear markets lasted longer. Such a mild retracement has not yet completed the time required by previous cycles, which further supports patience in waiting rather than rushing to declare a bottom—especially for those still operating according to the four-year cycle map.

Exchange Outflows Slow

Deposits and withdrawals on exchanges are thinning in sync. Both ends are currently operating at a similarly gentle pace, belonging to one of the quietest comprehensive flows in the past three years, far below the norm for 2023-2025. Balances give a similar signal from the other side: they have slowly risen since the April low and have remained basically flat since early July.

This reads more like indifference rather than distribution or accumulation—this pattern often appears in the quiet mid-section of a bear market. The minimal on-chain movement means that once demand changes, there is almost no ready supply to absorb it.

Off-Chain Insights

ETF Buying Entering a Lull

US spot ETF capital flows turned positive in mid-July, only to quickly fall back within the following week. Net inflows have turned slightly negative again, and compared to the redemption waves in June and early July, the current outflows are almost negligible.

Institutional channels are neither dumping nor rallying. After flipping last week, what truly deserves attention is sustainability rather than scale, and sustainability has not appeared.

Euphoria at the Peak

Downside protection costs nearly collapsed to zero on July 21— the same day Bitcoin created a local peak after rebounding from the June low. Hedge positions were sold at the top, and the deleveraging that accompanied the rebound led the market directly towards the subsequent decline.

For those positions, this week has been costly. Skew has risen from the lows, and capital flows have shifted: the volume of put/call ratios reached a year-to-date low, and significantly increased as prices fell; perpetual contract funding rates have been pinned below neutral for the entire month.

Open interest gives a more cautious reading. The open interest put/call ratio seems to have bottomed at the same time but has barely moved away from that low. Following the previous position structure, this is merely a repositioning rather than a change in stance.

Budget Shifts to Puts

Options buyers have paid for upside during the rebound; since prices peaked a week ago and fell back, budgets have shifted back to puts, although a large put trade dominated the end of this shift. The real change is on the call side—upside spending has significantly decreased compared to last year's pace. This does not appear to be panic hedging.

Volatility pricing agrees as well. The entire implied volatility curve has been compressed near the bottom of the range, with six-month terms almost never lower: options traders rarely price such quiet expectations for the next six months.

The Quietest Market Since 2019

Measured by the number of coins rather than dollars (thus price declines do not beautify the data), spot trading volume has fallen to its lowest since 2019. Excluding Binance (whose zero-fee promotions inflated tracked volumes in 2022-2023), the picture is similar, just still above the deepest trough of the last bear market.

Low trading volume itself is not a directional signal; it is more like describing who is still present. When cash is being paid to wait, a significant portion seems to have chosen to wait.

Buy Orders Waiting Below

The order book shows that funds are not leaving but taking a step back. Since early June, buy orders have been continuously piling up in the 2% to 20% range below the spot price, refreshing day after day. Above the price, the sell side has significantly thinned out, with the sell orders in the same range approaching the thinnest levels of the past month.

Buyers appear willing to enter but do not want to at the current price level; meanwhile, the supply hindering upward movement is also dwindling. A thin order book is a double-edged sword, often a way for a quiet market to suddenly accelerate.

Final Judgment

The vector remains on the sidelines

Glassnode's Bitcoin vector reading is Risk Off: moderate rather than extreme, positioned above the capitulation zone, which the model refers to as tactical pause. A defensive rather than capitulatory signal is precisely the actual manifestation of all the phenomena mentioned above.

The macro environment is paying for capital to wait, and both on-chain and off-chain appearances have fallen into silence, with no models requiring anyone to rush in. A rebound is unlikely to change this; what truly changes is the regime itself.

Conclusion

The current regime appears unchanged, rooted in the upstream of the crypto market. When government bond yields exceed basis trading and the dollar remains strong, marginal buyers are being paid to stay in cash, and the downstream surface reads the same signal: spot trading volume is at multi-year lows, exchange capital flows are nearly stagnant, and sell orders have thinned out. In terms of depth, this is the shallowest bear market on record; according to the timelines of previous cycles, it has not yet completed. Improvement will begin with policy and manifest as a return to the $69,000 short-term holder cost basis with a resurgence of ETF channels from idle to buying. If the $62,000 to $68,000 shelf is lost and exchange inflows awaken, this judgment will be invalidated.