Bitcoin 22% supply loss! Liquidity ratio must break 5 to truly break through

Bitcoin holds support at $80,700-$83,400, but Glassnode warns of insufficient liquidity. The realized profit and loss ratio needs to break 5x to confirm a recovery, with the current 22% supply in loss increasing the risk of a pullback. Binance’s monthly average inflow of 5,700 BTC hits a new low since 2020, indicating strong holding sentiment but not enough to confirm liquidity.

Glassnode: Liquidity Ratio of 5 is a Key Threshold

(Source: Glassnode)

In a X post, Glassnode states that after Bitcoin stabilized within the support zone of $80,700 to $83,400, market focus has shifted to liquidity. A sustained upward trend must be reflected in liquidity-sensitive indicators, especially the 90-day moving average of the realized profit and loss ratio. Strong price rebounds, including mid-cycle recoveries over the past two years, occurred when Bitcoin’s price-to-earnings ratio remained above 5.

The realized profit and loss ratio is an on-chain indicator created by Glassnode, calculated as (Market Price - Realized Price) / Realized Price. The realized price is the average cost of all Bitcoin based on their last on-chain move, representing the market’s “average holding cost.” When Bitcoin’s price is far above the realized price, the ratio rises, indicating overall market profitability; when the price approaches or falls below the realized price, the ratio declines, signaling market losses.

The 90-day moving average smooths short-term fluctuations to capture medium-term trends. Historical data shows that when this ratio exceeds 5, Bitcoin’s price has been more than 400% above the average cost, entering a “profitable” state. At this point, holders are confident and reluctant to sell, while new buyers are willing to chase higher prices, creating a positive feedback loop. Conversely, when the ratio is below 5, the market is in a “cautious wait-and-see” state, lacking the momentum for sustained growth despite no panic selling.

This trend has historically signaled liquidity flowing back into the market, with capital cycling into Bitcoin. Mechanistically, liquidity recovery often coincides with dovish Fed policies, a weakening dollar, or large institutional allocations. Only when these macro catalysts appear can the realized profit and loss ratio break through the 5x threshold, providing a foundation for sustained upward movement. Currently, the ratio remains below 5, indicating liquidity has not truly returned, which is a core reason why Glassnode considers the “uptrend likely to be short-lived.”

Glassnode also emphasizes the increasing supply pressure on Bitcoin. Currently, over 22% of circulating Bitcoin is in loss, a situation that previously occurred in Q1 2022 and Q2 2018. This increases the risk of a correction; if Bitcoin fails to hold key support levels—especially the short-term holder cost basis and the -1 standard deviation of the true market mean—long-term holders may start selling again. The 22% of supply in loss equates to about 4.6 million BTC holders in the red, who may choose to cut losses when prices rebound near their cost basis, creating resistance.

Binance Inflows Hit 2020 Low, Indicating Holding Sentiment

(Source: Glassnode)

CryptoQuant data shows limited selling activity currently, with Binance’s monthly Bitcoin inflow averaging about 5,700 BTC. This is less than half the long-term average (~12,000 BTC) and the lowest since 2020. Since exchange inflows are closely related to selling, sustained low inflows suggest investors are holding rather than preparing to sell.

Exchange inflow volume is one of the most direct on-chain indicators of selling pressure. When holders intend to sell Bitcoin, they typically transfer tokens from personal wallets to exchange addresses, list them for sale, and then withdraw fiat or stablecoins. An increase in exchange inflows often signals rising selling pressure, while a decrease indicates strong reluctance to sell. The current average inflow of 5,700 BTC per month is at a new low since 2020, which is a “quite positive signal.”

Crypto analyst Darkfost added: “Bitcoin inflow is at a historic low, which is a very positive sign. Despite Bitcoin’s price consolidating and macroeconomic uncertainties increasing, investors seem more inclined to hold Bitcoin.” Such holding behavior is especially rare in the current environment, where macro uncertainties—including Fed policies, Trump tariffs, and geopolitical risks—would typically push investors to reduce holdings for risk aversion, but data shows the opposite trend.

This reduces short-term downside risk but does not replace the need for liquidity confirmation. Glassnode emphasizes that low inflows only indicate “no active selling,” but do not mean “new buying.” For Bitcoin to break through the current range and continue rising, it requires not only holders’ reluctance to sell but also an inflow of incremental capital. This could come from ETFs, institutional allocations, or retail FOMO, but such signs are currently not evident.

Two Aspects of Bitcoin Liquidity

Stock liquidity (current state): Binance inflow of 5,700 BTC hits a new low, holders are reluctant to sell, supporting a lower downside risk.

Incremental liquidity (precondition for breakout): Realized profit and loss ratio needs to break 5x, ETF inflows must continue, and institutional new allocations are needed to drive sustained growth.

The current market is in a “stable stock liquidity, insufficient incremental liquidity” state. This configuration allows Bitcoin to hold support levels without falling further but makes it difficult to break resistance and rise continuously. Prices may oscillate between $85,000 and $93,500 until genuine incremental liquidity returns.

$93,500 Liquidity Buy Zone

Futures market data indicates that in the short term, prices may see liquidity-driven buying around $93,500. This level is a key liquidity concentration zone in the futures market, with large limit buy orders and stop-loss orders accumulated here. When prices approach this area, it may trigger chain reactions of buy orders, accelerating short-term price increases. However, Glassnode analysts believe that only when key market liquidity indicators reach certain thresholds will a stronger recovery occur.

$93,500 is not an arbitrary target but based on analysis of open interest distribution and liquidity heatmaps in the futures market. There are many stop-loss buy orders from shorts and new long positions near this level. If Bitcoin breaks through this level, forced liquidation of shorts will generate additional buy orders, pushing prices higher and creating a “short squeeze” effect.

However, this futures-driven rally is often short-lived. Once liquidity buying subsides, if there is no sustained buying support from the spot market, prices will quickly fall back. This is why Glassnode emphasizes that “the rally is likely to be short-term.” A lasting bull market requires incremental capital inflows into the spot market, not just technical buying in futures.

Investors should remain cautious: a breakout at $93,500 may offer short-term trading opportunities but should not be seen as a trend reversal signal. Only when realized profit and loss ratio exceeds 5x, ETF shows continuous net inflows over multiple days, and trading volume significantly increases can liquidity truly be considered recovered. At that point, Bitcoin would have a solid foundation to challenge $100,000 or higher.