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Bitcoin’s recent price resilience is masking a deeper structural issue: insufficient liquidity to sustain a broader recovery. While BTC has managed to defend key support zones and avoid a deeper drawdown, multiple on-chain and exchange metrics indicate that rallies are likely to remain short-lived until stronger demand returns.
Bitcoin price recovered slightly after the previous week's 7.48% correction at $87,787 on Monday. Bitcoin continued its recovery on Wednesday and is currently trading at $88,100.
Bitcoin continues to rise toward the $90,000 upper boundary of the horizontal price channel if the $87,787 level holds as support.
A close above this level could extend gains to the 50-day Exponential Moving Average (EMA), at $91,327. The daily chart shows a Relative Strength Index (RSI) at 42.27, suggesting that bearish movements are losing strength after recovering from near 35 on 25th January.
The RSI needs to close above the neutral point for the recovery rally to continue. The Moving Average Convergence Divergence (MACD) lines show convergence while their red histogram bars decline from the zero line.
On the other hand, if BTC closes below the $87,787 support, it could lead to further decline to $85,569, aligning with the 78.6% Fibonacci retracement level.
In an X post, Glassnode said, the market’s attention has shifted to liquidity after Bitcoin held the supports at $80,700 and $83,400.
A sustained rally transition must be reflected in liquidity, particularly the 90-day moving average of the realized profit/loss ratio.
Historically, Bitcoin has only recovered from its strong declines when the mid-cycle ratio reached 5 or higher, over the last two years. The new liquidity inflows, together with the restored risk appetite, have occurred during these particular situations.
At present, this threshold has not been met, suggesting the market lacks the depth needed for a lasting breakout.
Another source of caution is supply stress. More than 22% of the circulating Bitcoin supply is currently held at a loss.
Comparable levels were last observed during Q2 2018 and Q1 2022, both periods marked by heightened volatility and consolidation.
When a large share of supply sits underwater, the market becomes more sensitive to support breaks.
A failure to hold key levels, including the short-term holder cost basis and the true market mean could reintroduce selling pressure, particularly from longer-term holders seeking to reduce exposure.
Also Read: Bitcoin & Ethereum Dip: Are Crypto Bulls Losing Control?
Data from CryptoQuant shows limited selling currently as the monthly Bitcoin inflows to Binance are averaging around 5,700 BTC, less than half the long-term average of roughly 12,000 BTC and the lowest levels since 2020.
Since the exchange inflows often precede selling, persistently low inflows suggests investors are holding rather than distributing.
This reduces the probability of sharp downside moves but does not confirm a bullish shift.
