Key Points
- Expanding M2 money supply in China—up 0.87% over the past month—has increased liquidity, potentially channeling capital into digital assets.
- U.S. spot Bitcoin ETFs recorded $20 million in inflows this week, even as U.S. M2 money supply remained stagnant.
- On-chain data shows short-term holders are in a net unrealized loss, historically a precursor to accumulation phases.
- Bitcoin dominance rose by 1.57%, suggesting a flight to safety from altcoins back into BTC.
- Options market data reveals significant selling pressure between $109,000 and $115,000, creating a potential resistance zone.
- Retail traders sold roughly $48 million worth of Bitcoin in a single day, signaling weakening near-term demand.
Liquidity Shifts and Macro Backdrops
A notable driver behind Bitcoin’s latest price action lies in the evolving global liquidity landscape. China’s M2 money supply—the broadest measure of money in circulation—has expanded by 0.87% over the past month. This uptick reflects a deliberate policy stance aimed at stimulating economic activity, which often leads to surplus capital seeking higher-yielding or inflation-resistant assets. Historically, such liquidity injections have preceded increased allocations to risk assets, including digital currencies. While regulatory caution still defines China’s official stance on crypto, subtle market signals—such as the recent approval of a Solana ETF in Hong Kong—hint at a gradual thaw in institutional appetite for blockchain-based investments across the region.
Contrast this with the United States, where monetary conditions have remained largely static. The U.S. M2 money supply registered zero growth over the same period, underscoring a more restrained monetary environment. Despite this, institutional interest in Bitcoin has not waned. Spot Bitcoin ETFs in the U.S. attracted $20 million in fresh capital this week alone. This divergence—expanding liquidity in China paired with steady institutional demand in the U.S.—creates a dual-engine dynamic that could sustain upward price pressure, especially as global investors recalibrate portfolios ahead of potential macroeconomic shifts.
On-Chain Signals and Market Psychology
On-chain metrics offer deeper insight into how market participants are reacting to current price levels. The Short-Term Holder Net Unrealized Profit/Loss (STH-NUPL) indicator has dipped into negative territory, suggesting that many recent buyers are now underwater. While this may seem bearish on the surface, historical patterns show that such phases often mark inflection points. When short-term holders experience discomfort, long-term investors and strategic accumulators tend to step in, recognizing value in temporary dips. This behavioral cycle has repeated across multiple market cycles and may be unfolding once again.
Adding to this narrative is Bitcoin’s rising market dominance, which climbed 1.57% in just 24 hours. Dominance measures Bitcoin’s share of the total cryptocurrency market capitalization, and an increase typically signals a rotation out of speculative altcoins and back into the flagship asset. This shift often occurs during periods of uncertainty or when investors anticipate a major move in Bitcoin’s price. The current trend suggests that capital is consolidating around BTC, potentially laying the groundwork for a sustained rally if broader sentiment aligns.
Options Activity and Sentiment Divergence
Despite these constructive signals, not all market forces point upward. The options market tells a more cautious story. A dense cluster of short positions has emerged between $109,000 and $115,000—the very range where Bitcoin currently trades. Traders are actively selling call options or buying puts in this zone, effectively betting against a breakout. This behavior creates a formidable resistance band. Should price approach the upper end of this range, the resulting supply overhang could trigger profit-taking or even short-term reversals, especially if volume fails to support the move.
Compounding this pressure is a noticeable pullback from retail participants. On the day of this analysis, retail traders net sold approximately $48 million worth of Bitcoin. This retreat matters because retail activity often fuels momentum during early stages of rallies. Without their participation, upward moves may lack the fuel needed to overcome institutional hedging or options-based resistance. As institutional players typically reduce exposure heading into weekends, the burden of sustaining price action falls squarely on retail shoulders—a group currently showing signs of fatigue or caution.
Conclusion
Bitcoin’s recent climb above $110,000 reflects a confluence of macro liquidity trends, institutional conviction, and on-chain accumulation signals. Yet this momentum faces tangible headwinds from options-driven resistance and retreating retail demand. The interplay between these opposing forces will likely define Bitcoin’s trajectory in the immediate term. If institutional inflows continue and short-term holder stress gives way to fresh accumulation, the path could clear for a deeper rally. However, without renewed retail engagement or a breakthrough past the $115,000 psychological barrier, the market may consolidate—or even correct—before the next leg up.
