Epic turnover and selling scale: Will the market face further pullbacks?

Original Title: From Rally to Correction

Original Authors: Chris Beamish, Antoine Colpaert, CryptoVizArt, Glassnode

Original Translation: AididiaoJP, Foresight News

After the rally triggered by the Federal Open Market Committee, bitcoin is showing signs of weakness. Long-term holders have realized profits on 3.4 million BTC, while ETF inflows have slowed. Under pressure in both spot and futures markets, the short-term holder cost basis of $111,000 is a key support level; if breached, there may be a risk of a deeper cooling off.

Summary

· After the FOMC-driven rally, bitcoin has entered a correction phase, showing signs of a "buy the rumor, sell the news" market, with the broader market structure pointing to weakening momentum.

· The current 8% drop is still relatively mild, but the $67.8 billion realized market cap inflow and the 3.4 million BTC profit realized by long-term holders highlight the unprecedented scale of capital rotation and selling in this round.

· ETF inflows slowed sharply before and after the FOMC meeting, while long-term holder selling accelerated, creating a fragile balance of capital flows.

· Spot trading volume surged during the sell-off, and the futures market experienced sharp deleveraging volatility. Liquidation clusters revealed the market's vulnerability to liquidity-driven swings in both directions.

· The options market repriced aggressively, skew spiked, and demand for put options was strong, indicating defensive positioning. The macro backdrop suggests the market is increasingly fatigued.

From Rally to Correction

Following the FOMC-driven rally that peaked near $117,000, bitcoin has transitioned into a correction phase, echoing the classic "buy the rumor, sell the news" pattern. In this issue, we look beyond short-term volatility to assess the broader market structure, using long-term on-chain indicators, ETF demand, and derivatives positioning to evaluate whether this pullback is a healthy consolidation or the early stage of a deeper contraction.

On-Chain Analysis

Volatility Context

The current decline from the all-time high (ATH) of $124,000 to $113,700 is only 8% (with the latest drop reaching 12%), which is mild compared to the 28% drawdown in this cycle or the 60% drawdown in previous cycles. This aligns with the long-term trend of declining volatility, both between macro cycles and within phases of a cycle, similar to the steady advance of 2015–2017, though the parabolic blow-off phase has yet to appear.

Cycle Duration

Overlaying the past four cycles shows that even though the current trajectory closely matches the previous two cycles, peak returns have diminished over time. Assuming $124,000 marks the global top, this cycle has lasted about 1,030 days, very close to the roughly 1,060 days of the previous two cycles.

Capital Inflow Measurement

Beyond price action, capital deployment provides a more reliable perspective.

Realized market cap has seen three waves of increases since November 2022, raising the total to $1.06 trillion, reflecting the scale of inflows supporting this cycle.

Realized Market Cap Growth

Contextual comparison:

· 2011–2015: $4.2 billion

· 2015–2018: $85 billion

· 2018–2022: $383 billion

· 2022–present: $67.8 billion

This cycle has absorbed a net inflow of $67.8 billion, nearly 1.8 times the previous cycle, highlighting the unprecedented scale of capital rotation.

Profit Realization Peaks

Another difference lies in the structure of inflows. Unlike the single wave of earlier cycles, this cycle has seen three distinct, months-long surges. The realized profit/loss ratio shows that each time profit realization exceeds 90% of moved tokens, it marks a cyclical peak. Having just exited the third such extreme, the probability now favors a cooling-off phase.

Long-Term Holder Profit Dominance

Focusing on long-term holders, the scale becomes even clearer. This indicator tracks the cumulative profit of long-term holders from new ATHs to the cycle peak. Historically, their massive selling has marked the top. In this cycle, long-term holders have realized profits on 3.4 million BTC, already surpassing previous cycles, highlighting the maturity of this group and the scale of capital rotation.

Off-Chain Analysis

ETF Demand vs. Long-Term Holders

This cycle has also been shaped by the tug-of-war between long-term holder selling and institutional demand via US spot ETFs and DATs. With ETFs becoming a new structural force, prices now reflect this push-pull effect: long-term holder profit-taking limits upside, while ETF inflows absorb selling and sustain the cycle's progress.

Fragile Balance

ETF inflows have so far balanced long-term holder selling, but the margin for error is slim. Around the FOMC meeting, long-term holder selling surged to 122,000 BTC/month, while ETF net inflows plunged from 2,600 BTC/day to near zero. The combination of increased selling pressure and weakened institutional demand created a fragile backdrop, setting the stage for weakness.

Spot Market Pressure

This vulnerability is evident in the spot market. During the post-FOMC sell-off, trading volume surged as forced liquidations and thin liquidity amplified the downward move. Though painful, a temporary bottom formed near the short-term holder cost basis of $111,800.

Futures Deleveraging

Meanwhile, as bitcoin fell below $113,000, futures open interest dropped sharply from $44.8 billion to $42.7 billion. This deleveraging event flushed out leveraged longs, amplifying downside pressure. While destabilizing in the short term, this reset helps clear excess leverage and restore balance to the derivatives market.

Liquidation Clusters

The perpetual contract liquidation heatmap provides more detail. As prices fell below the $114,000–$112,000 range, dense clusters of leveraged longs were wiped out, triggering mass liquidations and accelerating the decline. Risk pockets remain above $117,000, making the market vulnerable to liquidity-driven swings in both directions. Without stronger demand, vulnerability near these levels increases the risk of further sharp volatility.

Options Market

Volatility

Turning to the options market, implied volatility provides a clear view of how traders navigated a turbulent week. Two main catalysts shaped the market: the first rate cut of the year and the largest liquidation event since 2021. As hedging demand built, volatility climbed ahead of the FOMC meeting but quickly faded after the rate cut was confirmed, indicating the move was largely priced in. However, the violent futures liquidations on Sunday night reignited demand for protection, with one-week implied volatility leading the rebound and strength extending across tenors.

Market Repricing of Rate Cuts

After the FOMC meeting, there was aggressive demand for put options, either as protection against sharp declines or as a way to profit from volatility. Just two days later, the market delivered on this signal with the largest liquidation event since 2021.

Put/Call Option Flows

After the sell-off, the put/call option volume ratio trended down as traders locked in profits on in-the-money puts, while others rotated into cheaper calls. Short- and medium-term options remain heavily skewed toward puts, making downside protection expensive relative to upside. For participants with a constructive view toward year-end, this imbalance creates opportunities—either to accumulate calls at relatively low cost or to finance them by selling overpriced downside risk exposure.

Options Open Interest

Total options open interest is hovering near all-time highs and will drop sharply at Friday morning's expiry, before the market rebuilds into December. Currently, the market is in a peak region, where even small price moves force market makers to hedge aggressively. Market makers are short on the downside and long on the upside, a structure that amplifies sell-offs while capping rebounds. This dynamic skews near-term volatility risk to the downside, increasing fragility until expiry clears and positions reset.

Conclusion

The post-FOMC pullback in bitcoin reflects a classic "buy the rumor, sell the news" pattern, but the broader context points to growing fatigue. The current 12% drop is mild compared to past cycles, but it comes after three major waves of capital inflows that boosted realized market cap by $67.8 billion, nearly double the previous cycle. Long-term holders have already realized profits on 3.4 million BTC, highlighting the scale of selling and maturity in this rally.

Meanwhile, ETF inflows that previously absorbed supply have slowed, creating a fragile balance. Spot volumes have surged due to forced selling, futures have seen sharp deleveraging, and the options market is pricing in downside risk. These signals collectively indicate that market momentum is running out, with liquidity-driven volatility dominating.

Unless institutional and holder demand aligns again, the risk of a deep cooling-off remains high.