Bitcoin market shows late-cycle patterns as leverage peaks

Bitcoin (BTC) is experiencing declining capital inflows and surging speculative activity, mirroring patterns observed near previous cycle peaks, according to an Aug. 20 Glassnode report.

BTC retraced nearly 9.2% to $112,900 following last week’s high at $124,400, accompanied by substantially weaker capital inflows compared to earlier 2024 breakouts.

The realized cap increased just 6% monthly during the current rally, significantly below the 13% rate recorded during the initial $100,000 breakout in late 2024.

The report noted that investors showed limited demand even amid reduced profit-taking activity from existing holders.

The Volatility-Adjusted Net Realized Profit/Loss metric shows markedly lower selling pressure compared to major breakouts at $70,000, $100,000, and July’s $122,000 peak.

The disparity suggests the market failed to sustain momentum even with lighter sell-side pressure.

Leverage drives market volatility

Futures markets exhibited pronounced activity during Bitcoin’s recent price action, with open interest across Bitcoin contracts maintaining elevated levels at $67 billion.

The correction eliminated $2.3 billion in open interest, representing one of the 23 largest nominal declines on record.

Altcoin derivatives reached new extremes, with combined open interest across major tokens surging to $60.2 billion before declining $2.6 billion during the weekend correction.

Combined altcoin liquidations peaked at $303 million daily, more than double Bitcoin futures liquidation volumes.

Ethereum perpetual futures volume dominance hit an all-time high of 67%, marking the strongest structural shift toward altcoin speculation on record. At the same time, open interest dominance climbed to 43.3% against Bitcoin’s 56.7%, reaching its fourth-largest level historically.

Previous peak parallels emerge

The report argued that current market timing aligns closely with previous bull cycles.

Both 2015-2018 and 2018-2022 cycles reached all-time highs approximately two to three months beyond the current cycle’s relative position when measured from cycle lows.

Bitcoin’s circulating supply has remained above the positive one-standard deviation band for 273 days, the second-longest period on record behind the 2015-2018 cycle’s 335 days.

Long-term holders have realized profit volumes comparable to all previous cycles except 2016-2017, indicating substantial selling pressure from historically patient investors.

These metrics collectively suggest the current cycle operates in its historically late phase, though the report noted each cycle carries unique characteristics that prevent guaranteed temporal patterns.

The combination of weakening demand, record leverage levels, and historical timing parallels creates conditions reminiscent of previous cycle peaks, though market evolution could alter traditional four-year patterns moving forward.

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