Bitcoin's Risk Signals Illuminate Concerns Despite Trader Optimism on Sub-$100K Prices

Bitcoin’s risk-off signals highlight concerns even as traders view sub-$100K BTC as a discount

Summary:
In the current cryptocurrency landscape, Bitcoin is signaling potential risks as it approaches a critical psychological threshold of $100,000. Recent metrics indicate a bearish trend, despite some traders considering prices below this mark as a bargain. Key indicators, including profit-loss sentiment and significant drawdowns, suggest a structural correction may be underway.

Key Takeaways:

Bitcoin's “risk-off” signals are currently near “High-Risk” levels, a historical marker for bearish phases.
The Profit-Loss sentiment for Bitcoin has reached a rare extreme of -3, indicating a significant potential for market correction.
With a -32% drawdown, Bitcoin is caught between areas of correction and capitulation, hinting at a prolonged decline with possible prices settling between $90,000 and $80,000.

Bitcoin's Structural Weakness Near $90,000

CryptoQuant's Risk-Off model utilizes six key metrics: downside volatility, upside volatility, exchange inflows, funding rates, futures open interest, and market cap behavior, to evaluate the market's fragility. Given the oscillator's position near 60, within the High-Risk zone, the risk of a market correction remains elevated.

Bitcoin Risk-off signal source from CryptoQuant

According to Bitcoin researcher Axel Adler Jr, the Profit-Loss score has dropped to -3, suggesting a significant number of unprofitable UTXOs. Historically, similar levels have coincided with bearish market conditions and extensive cooldown periods. The current price decline of -32% surpasses the typical cycle pullbacks (20–25%), yet remains above capitulation levels (50% to 70%), positioning Bitcoin in a precarious "intermediate zone."

Adler pointed out that without improvements in macroeconomic conditions and on-chain profitability, the likelihood of further declines is high, even as prices seem to stabilize around $90,000.

Percentage Drawdown of Bitcoin from Historical Highs

Presently, on-chain data from Glassnode provides a glimmer of hope. The analytics firm observed that Bitcoin's recent drawdown resulted in the largest surge of realized losses since the FTX collapse in 2022, primarily influenced by short-term holders. However, long-term holder losses remain relatively low, showcasing the resilience of core holders, which has, in the past, helped mitigate deeper capitulation during adverse cycles.

The $100,000 Bitcoin Dilemma: Momentum vs. Trend

One analyst from CryptoQuant referred to Bitcoin's journey towards the $100,000 mark as a “psychological turning point.” While a successful breakout could reignite market momentum, which may be bolstered by a Federal Reserve interest rate cut scheduled for December 10, major round numbers frequently bring about increased volatility and failed breakout attempts.

Market Cap vs. Realized Cap Growth Rate Difference

The growth rate difference between market cap and realized cap is currently -0.00095, indicating that the market cap is decreasing at a faster pace than the realized cap. With Bitcoin priced at approximately $91,000, the analyst leans towards a perspective of structural weakness over potential trend expansion. Additionally, Bitcoin futures trader Byzantine General highlighted the unstable price actions of BTC, further emphasizing the current market challenges.

Related: Bitcoin accumulation trends strengthen as realized losses near $5.8B