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Bitcoin's next leg up depends on a liquidity reset
Bitcoin’s ability to mount a sustainable rally now hinges on renewed market liquidity, according to on-chain analytics firm Glassnode. Key metrics — notably the profit/loss ratio relative to its 90-day moving average — must improve materially. Around 22% of BTC’s circulating supply sits at a loss, a level that has coincided with past correction phases and raises the risk of renewed selling pressure if critical supports fail.
Why the profit/loss ratio matters
Glassnode’s analysis points to the profit/loss ratio as a practical on-chain liquidity gauge. Historically, mid-cycle recoveries strengthened when that ratio remained above 5 on the 90-day moving average, signaling persistent capital inflows and a healthier appetite for new purchases. Today the metric sits near 2, well below the threshold Glassnode links to sustained rallies. For traders and investors watching BTC price action, that shortfall highlights how fragile recent gains may be without a fresh influx of buying power.
Supply at a loss increases downside risk
The firm also flags Bitcoin’s supply distribution as a potential pressure point. Approximately 22% of circulating BTC is currently underwater, a share similar to correction windows in early 2022 and mid-2018. When a meaningful tranche of holders sits below breakeven, a break of technical supports can trigger stop-losses and forced selling, amplifying downside momentum. That dynamic makes it essential to monitor both macro liquidity and on-chain flows as early-warning indicators.
Exchange flows and investor behavior
Data from CryptoQuant offers some nuance: Binance inflows remain near historic lows, suggesting most investors are not rushing to deposit BTC to exchanges for sale. Low exchange inflows can reduce immediate liquidation pressure, implying short-term sell-offs may be limited unless inflows pick up or broader liquidity conditions deteriorate. Still, low inflows alone do not substitute for sustained capital entering the market.
What traders should watch next
Market participants should track several on-chain and market indicators: the profit/loss ratio versus its 90-day moving average, changes in exchange inflows (especially to major venues like Binance), long-term holder selling trends, and the percentage of supply in loss. A clear upward shift in these liquidity indicators would support the next durable uptrend, while deterioration could open the door to deeper corrections.
In short, Bitcoin’s near-term trajectory is less about technical patterns and more about liquidity dynamics. Without renewed capital flows and improved on-chain metrics, rallies risk fading and corrections may re-emerge despite recent support holding.
Source: crypto
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