Bitcoin Rally at Risk? ETF Trading Volume Collapses as BTC Battles $65K Resistance

Bitcoin ETF Volume Collapses 78% from Peak as Long-Term Holders Take Profits – Is the $65K Rally Losing Steam?

Bitcoin’s recent recovery above $65,000 following softer-than-expected CPI data has sparked cautious optimism, but on-chain and ETF data suggest the rally faces a significant conviction test. While spot Bitcoin ETFs previously drove massive inflows, trading volume has plummeted 78% from its peak of $5.8 billion to just $1.25 billion, signaling weakening institutional momentum. At the same time, long-term holders (LTHs) are realizing losses during this relief rally, creating supply pressure that short-term buyers are struggling to absorb.

This divergence between price action and underlying conviction raises questions about whether Bitcoin’s current move represents the start of a new bull trend or merely another short-lived relief rally.

ETF Volume Collapse Signals Cooling Institutional Demand

Glassnode data highlights a dramatic drop in spot Bitcoin ETF trading activity. From a peak of $5.8 billion in daily volume, the 30-day moving average has fallen sharply to $1.25 billion — a 78% collapse. This decline coincides with Bitcoin’s attempt to reclaim higher ground, suggesting that the easy inflows that fueled earlier rallies are no longer as robust.

Strong ETF performance earlier in the cycle helped legitimize Bitcoin as an asset class and provided a steady bid during dips. The recent volume contraction indicates that many institutional participants have either completed their initial allocations or are adopting a more cautious stance amid macroeconomic uncertainty and range-bound price action.

The drop in ETF volume is particularly notable because these products had been a primary driver of spot demand. With reduced liquidity from this channel, Bitcoin must rely more heavily on organic buying from retail, whales, and other sources to sustain upward momentum.

Long-Term Holders Realizing Losses on the Bounce

On-chain metrics reveal another layer of pressure. Long-term holders — typically the most convicted cohort — are realizing losses as Bitcoin pushes toward $66,000. This behavior contrasts with previous cycles where LTHs tended to HODL through recoveries, providing a strong demand base.

Short-term holders who bought near recent lows are also taking profits at volumes last seen around the May peak. The combination of LTH distribution and STH profit-taking creates a supply overhang that buyers must overcome for the rally to continue.

This pattern suggests many investors view the current move as a relief rally rather than the start of a new bull market. Cycle-top buyers are reducing exposure, while local-bottom buyers lock in gains, leading to a demand-supply imbalance.

Technical Structure and RSI Pattern Under Pressure

From a technical standpoint, Bitcoin is testing key resistance levels while the daily RSI has once again moved above 65 — a zone that has previously coincided with local tops since August 2025. If history repeats, another top could form quickly. However, a failure to roll over and continued consolidation would mark the first break in this pattern, potentially signaling a shift toward bullish momentum.

Bitcoin is up over 9% in Q3 so far, its first green quarter after three consecutive quarters of losses averaging nearly 20%. While the softer CPI provided a catalyst, the lack of strong LTH accumulation and declining ETF volume suggests the rally may need fresh demand to push meaningfully higher.

Derivatives and Liquidation Dynamics Add Volatility Risk

Derivatives markets show mixed signals. While some platforms maintain bullish long/short ratios, the overall environment remains sensitive to liquidation cascades. Dense liquidity clusters above current prices could trigger short squeezes on upside moves, but the lack of strong spot demand makes sustained breakouts challenging.

The funding rate dynamics and open interest levels indicate that leveraged traders are active, but conviction is not yet strong enough to overcome the selling pressure from profit-taking and LTH distribution.

Broader Market Implications for Bitcoin’s Cycle

Bitcoin’s current setup highlights a classic late-cycle dynamic: macro relief provides a temporary bid, but underlying conviction from long-term participants remains shaky. For the rally to transition into a full bull market, stronger accumulation from LTHs, sustained ETF inflows, and positive catalysts (such as regulatory clarity or macroeconomic easing) will likely be required.

The four-year cycle context remains relevant. With the cycle potentially extending into late 2026, a period of grinding consolidation and gradual bottoming is still a plausible base case. The current relief rally could either fizzle out or serve as the foundation for the next leg higher, depending on how demand absorbs the ongoing supply.

What Would Strengthen the Bullish Case?

Several factors could shift the balance back in favor of bulls:

• Renewed ETF inflows and institutional accumulation.
• Long-term holders stopping loss realization and resuming accumulation.
• A decisive technical breakout above key resistance with strong volume.
• Positive macro developments, such as clearer signals of rate cuts or equity market strength.

Conversely, continued LTH distribution, further ETF volume decline, or a breakdown below recent supports would increase the risk of a deeper correction.

Strategic Considerations for Bitcoin Investors

Long-Term Holders: View current levels as part of a healthy consolidation phase. Focus on on-chain metrics and institutional flows rather than short-term price swings.

Short-Term Traders: Monitor key technical levels and liquidation clusters. False breakouts remain a risk in the current low-conviction environment.

Risk Management: Maintain balanced exposure, use defined stop-losses, and avoid over-leveraging during uncertain periods.

The divergence between price recovery and weakening conviction from key cohorts creates a high-stakes setup. Bitcoin needs stronger demand to absorb selling pressure if the rally is to sustain.

Conclusion: Conviction Test at $65K as ETF Volume and LTH Behavior Raise Questions

Bitcoin’s post-CPI rally has brought the price back above $65,000, but declining ETF volume (down 78% from peak) and rising long-term holder profit-taking suggest the move faces a significant conviction test. While softer inflation data provided a catalyst, the lack of strong accumulation from core holders and reduced institutional trading activity indicate that fresh demand is needed to push higher.

The current setup — relief rally amid weakening on-chain conviction — is typical of transitional market phases. Whether this evolves into a sustained bull trend or another consolidation period will depend on how buyers absorb the ongoing supply and whether new catalysts emerge.

As the market matures, with ETFs and institutional infrastructure playing larger roles, Bitcoin’s price action is becoming less dependent on pure retail FOMO and more influenced by professional capital flows and on-chain dynamics. Investors should watch ETF volumes, LTH behavior, and technical confirmation around key levels closely in the coming weeks.

The $65K zone remains pivotal. A successful defense and continued accumulation would strengthen the bullish case, while further distribution could lead to renewed downside pressure. For now, caution is warranted as Bitcoin navigates this high-stakes consolidation phase.

Srebrin Petrov publication: "Bitcoin Rally at Risk? ETF Trading Volume Collapses as BTC Battles $65K Resistance" was written for 24crypto.news

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