Bitcoin Hits $66,000 but 4 Signs Suggest Caution

Bitcoin recently climbed back above $66,000 for the first time since early June. While this movement helps recover losses from recent months, the data shows that this rally is built on a shaky foundation. Only 53% of circulating Bitcoin is currently in profit, which is well below the four year average of 76%. The market is now waiting to see if this price increase can overcome the lingering damage from the previous slump.

Trading volume remains unusually thin, with daily spot activity currently about 29% lower than the historical average since 2019. Sellers are still outpacing buyers in the spot market, suggesting that the recent price gains happened before a strong wave of new buyers actually arrived. Until trading volume picks up, even small shifts in demand could lead to outsized price swings.

Derivatives traders are also playing it safe. There is a high demand for protection against future price drops, with the cost of put options sitting significantly higher than call options. While funding rates for futures remain positive, the overall leverage in the system is lower than usual. This caution means that while the market is less likely to see massive liquidations, investors are clearly not yet convinced that the bottom is firmly in place.

On the positive side, long term holders continue to keep supply off the market, as over 60% of Bitcoin has not moved in more than a year. This tight supply is now meeting a fresh wave of interest from US spot Bitcoin ETFs, which recently recorded six consecutive days of net inflows. Whether this demand from institutional investors is enough to sustain the rally remains the key question for the coming weeks.