Source: Glassnode; Translated by: Wuzhu, Golden Finance

Abstract

After Bitcoin broke through $105,000 for the second time at the end of January, the market entered a stage of contraction, and the monthly price momentum of major assets fell sharply.

Bitcoin remains relatively stable, while Ethereum, Solana and Memecoins are facing deeper adjustments, reflecting changes in risk appetite.

Solana has become a market leader in capital inflows over the past two years, while Ethereum has been relatively difficult to attract sustained demand.

However, this week, capital flows for all digital assets except Bitcoin have dropped sharply, and Solana and its associated memecoin ecosystem have been hit relatively hard.

Bitcoin (-11.1%), Ethereum (-23.8%), Solana (-6.2%) and Memecoins Index (-52.1%) all declined. Reflecting a weaker interest in leveraged speculation.

The market momentum took a breather

In late January 2025, the Bitcoin market tried to break through its historical high and return to the price discovery stage. However, the rebound failed to gain the necessary momentum, and the market has since entered a period of contraction and consolidation, with the price momentum of major assets falling sharply.

Bitcoin: +48.4% (November 2024) → -5.9% (February 2025)

Ethereum: +60.3% (December 2024) → - 16.9% (February 2025)

Solana: +53.2% (November 2024) → -33.1% (February 2025)

Meme Coins Index: +90.2% (December 2024) → -37.4% (February 2025)

It is worth noting that Memecoins and Solana Booming under strong market trends, but tends to pull back sharply during downturns. Ethereum has been one of the weakest currencies throughout the cycle, and while it outperformed Solana this week, a strong overt trend has not yet formed.

Evaluation Performance To date

The recent slowdown comes after a long period of strong growth in major digital assets. Looking at the performance since the beginning of 2023, we can see that there are significant differences in the performance of each asset in the cycle so far:

Bitcoin's transaction range is about 3.4 times higher than in April 2023, A benchmark return overview is provided.

Ethereum struggles with its peers, with returns ranging from 1.3 times to 2.0 compared to April 2023Time between times.

Solana’s return since 2023 peaked at 11.8 times in early January 2025, but has since dropped sharply to around 7.6 times as the current correction is implemented.

Memecoins Index: The price surge in mid-2024 is basically consistent with Solana’s outstanding performance, reaching a 5.2x peak since 2023. However, the industry has been hit quite hard in recent weeks, with overall performance now the worst of four assets.

This reflects the high beta characteristics of Solana, which has experienced both the strongest gains and the most drastic pullback. Bitcoin’s more stable trend highlights its resilience as a benchmark return feature in the digital asset field. Memecoins, in particular, has seen a significant decline in investor demand recently, indicating a change in risk appetite.

Capital flows drive market

Solana's strong performance over the past two years is consistent with the ongoing capital inflows brought about by investor demand. Judging from the monthly changes in the realized market value, we can see that the capital flow patterns of various digital assets are clear:

Solana: It has always attracted higher relative capital inflows, supporting its strong price appreciation.

Ethereum: Among the major currencies, net capital inflows are the weakest, which explains the relatively poor performance.

Memecoins: Several sudden but unsustainable surges in capital inflows reflect speculative outbreaks, but without sustained momentum.

However, capital inflow momentum for all digital assets has declined in recent weeks. It is worth noting that Ethereum and top Memecoins have now turned negative (capital outflow), with Ethereum's net outflow of market capitalization of -0.1%, while the Memecoins index has a more drastic net outflow of -5.9%.

This indicates a significant cooling of speculative desire and implies that capital may flow out of riskier assets in the future.

Futures market weakness

As the spot market momentum begins to weaken, we can also see a decline in capital inflows in the perpetual futures market. Spot demand cooled down sharply in perpetual open interest contracts (OIs) for all major assets, indicating a decrease in speculation and a decline in spot and arbitrage yields.

The rate of change in open positions has highlighted the general retreat of capital in the past 30 days:

Bitcoin OI: -11.1%

Ethereum OI: -23.8%

Solana OI: -6.2%

Memecoins OI: -52.1%

The overall decline in open positions indicates speculators Leverage exposure is being reduced, which may be due to weakening market momentum and increased market uncertaintyCaused. The biggest drop is Memecoin, which tends to attract more short-term leverage bets, but it quickly loses its appeal as long as market sentiment weakens.

Finance rates show bearish sentiment

The decline in perpetual futures financing rates further exacerbates the weakness of open positions. This reflects a shift in bearish sentiment and closing of leveraged positions, especially in riskier assets.

Bitcoin and Ethereum financing rates are still slightly positive, and their deeper liquidity profile tends to have positive financing rates unless during events where leverage ratios are significantly lower.

Solana's financing rate has been slightly lower and negative in recent weeks, indicating that demand for long speculative positions is cooling.

Memecoins’ financing rates have become very negative, indicating that shorts are now dominant in these highly speculative assets, with many traders closing positions (or being liquidated).

The negative financing rates of Solana and Memecoins indicate a net turn in bearish sentiment for high-risk assets and excessive long leverage is closed.

ETF traffic and market impact

As the market is in a contraction phase, institutional interest in Bitcoin and Ethereum has slowed down based on spot ETF traffic. By standardizing net inflows with native spot volumes of each asset, we can measure the weight and impact of ETFs on market dynamics.

Last week, Bitcoin ETF outflows exceeded USD 200 million per day, but then a strong rebound in buyer activity, surpassing 8% of global spot trading volume, highlighting institutional demand (similar to "Downtime buy” behavior).

Demand for Ethereum ETFs has cooled significantly, and the scale is still much smaller than Bitcoin. ETH's ETF activity hovers near zero in terms of net inflows and outflows, indicating a lack of strong traditional investor demand and participation.

So far, this divergence has been the subject of this market cycle and has cemented Bitcoin’s dominance in the institutional portfolio. Ethereum still struggles to attract a large amount of continuous capital inflows, which further explains the relatively poor performance in recent years.

Key Bull and Bear Threshold

Bitcoin is currently trading at $1,000-$5,000 above the Short-term Holder (STH) cost base, at $92,500. Historically, this level has been a key pivot point between local bull and bear phases, and is the pivot point for recent average buyers to move between unrealized profits and losses.

Recalling the previous situation where Bitcoin hits a new high and then corrects downward, we can see similar patterns in May 2021, November 2021, April 2024 and February 2024.

In each case, the downward trendThe potentials all extend to the lower limit of the STH cost basis model, specifically -1 standard deviation (σ) below the cost basis. Currently, this lower limit is at $71,600, helping to predict the downside risks that may occur if these historical patterns repeat.

Consolidation after record highs

In previous examples of Bitcoin hitting new highs, we observed a consistent post-rebound pattern in which the surge in actual supply density occurred at spot prices Within ±15% range. This is due to the market's transition from a radical upward trend to a price consolidation as the market trades within a relatively narrow range.

This behavior is obvious at the top of the previous cycle, where:

As the market rebounded within the price discovery range, the actual supply density fell all the way to the price peak.

Then, when the market enters the adjustment or consolidation phase, market participants begin to redistribute tokens.

This usually happens when approaching the STH cost base, as new investors’ beliefs and demand conditions are tested.

The current actual supply density is consistent with the typical ATH post-consolidation phase, with buyers and sellers trying to establish a new balance before the next major trend unfolds.

Close to the decisive market moment

To better understand the market's sensitivity to this supply density, we can analyze the recent post-ATH distribution stage short-term holders (STH) holdings Some supply volume. This helps measure the pattern of accumulation of new investors and whether the current situation is similar to past cycle peaks.

When comparing STH supply changes, we observed:

The recent accumulation phase is very similar to May 2021, indicating that the supply is equally large, and investors' price drops below 92.5 Ten thousand dollars will be very sensitive.

New investors also accumulated a lot in April 2024, but the magnitude of the upward trend of STH supply in the current cycle is more structurally consistent with May 2021 rather than 2024.

In view of these similarities, we are now very close to the decisive moment of the market—the stage where price action is ready to unfold. If demand remains strong, Bitcoin may establish a new range above ATH. However, the lack of ongoing buying pressure may lead to a deeper allocation-driven adjustment similar to the previous post-ATH phase. This may be driven by recent panic among buyers who have seen their recent purchases go from profitable to unrealized losses in holding.

Conclusion

Bitcoin has been consolidating around $95,000 for several weeks, and the trading range is relatively stable. But this is not the case in the broader digital asset sector, with Ethereum, Solana and Memecoins all falling sharply from cyclical highs. In particular, Memecoins' demand has cooled significantly, capital outflows, sharp price declines and bearish situations in the futures marketXu is a clear proof.

For Bitcoin, the key level to pay attention to is that the short-term holder cost base is around $925,000. This is a key point, and most buyers' holdings will turn into unrealized losses in the near future. As panic emerges, this may lead to more declines. In either case, the current consolidation phase seems to be approaching the later stage, and the market seems ready to move in one direction again.