Reading on-chain data at the right time can give investors an edge.
In the current phase of the cycle, timing is more important than ever. From a technical perspective, traders have wiped over $10 billion from the market this week, pushing Bitcoin closer to $70,000.
Now that the major liquidity clusters are on both the upside and the downside, the next move could see significant liquidity movement in both directions.
That said, several early indicators point to bulls gradually losing control. Bitcoin sentiment has plummeted to extreme fear, a level that has historically signaled capitulation events.
At the same time, more than 45% of short-term holders (STHs) are now underwater, increasing the likelihood of panic selling as market participants begin to test their convictions.
It is striking that the same trend is visible among American investors.
According to CryptoQuant, Bitcoin’s Coinbase Premium Index (CPI) recently fell to a more than three-month low of -0.17, highlighting weak demand from US-based participants.
This weakness is also reflected in ETF flows, with Spot Bitcoin ETFs recording more than $1.4 billion in net outflows this week alone.
Taken together, these signals suggest that bears currently have the advantage and are exiting Bitcoin [BTC] vulnerable to further downward consequences.
As a result, the $70,000 support level looks increasingly difficult to defend, especially when another key market signal is taken into account.
Bitcoin sees liquidity shift as stablecoin outflows increase
The timing of moves in a risky market rarely seems like coincidence.
As on-chain signals turn bearish, stablecoin outflows reflect classic flight-to-safety behavior. According to data from DeFiLlama, more than $2 billion worth of stablecoins have left the market, indicating increased hedging activity from investors.
But these liquidity shifts go beyond just the capital leaving Bitcoin.
In particular the offering of stablecoins on Hyperliquid [HYPE] has increased by more than 8.25% in the same period, translating into an inflow of more than $500 million. This move matches the HYPE/BTC ratio’s increase of over 10% this week, highlighting where liquidity is actually rotating.
The most important takeaway? This trend may be just getting started.
As the analyst noted, more than $8 billion in USDC is now on Hyperliquid, showing a large pool of stablecoin liquidity on the platform. The deal with Circle will generate USDC returns, some of which are expected to flow into buybacks.
Based on rough estimates, this could add approximately $700,000+ per day in additional buyback pressure on top of what is already happening today. Essentially, the possibility remains that HYPE continues to maintain Bitcoin’s dominance, with the 63% rally in the second quarter of the HYPE/BTC ratio possibly just the beginning.
As a result, Bitcoin’s next step is increasingly leaning towards bear control.
As signals on the chain turn bearish, liquidity leaving the marketstablecoins flowing into HYPE and the HYPE/BTC ratio growing, Bitcoin’s plunge into extreme fear reflects the increasing downward pressure on the market.
Final summary
- Bitcoin is showing weakening momentum with extreme fear, outflows and bearish signals pointing to more downside risk towards $70,000.
- Liquidity is turning into HYPE, with stablecoin inflows and buyback support amplifying relative outperformance versus Bitcoin.