Signal of the week: Bitcoin accounted for 42.9% of total crypto trading volume in July, its highest share since Q1 2023. Historically, Bitcoin’s trading dominance tends to rise during the later stages of bear markets as investors rotate from altcoins into the relative safety of BTC.
Bitcoin continued trading in a relatively tight range last week, while the crypto market is quietly rotating toward it. Although Bitcoin is attracting a larger share of trading activity, other indicators suggest investors remain cautious. Long-term holders reduced their supply for the first time in several weeks, stablecoin reserves on exchanges continued to shrink, and ETF investors are increasingly under pressure as more recent inflows move into loss.
About the Bitcoin Impact Index
The Bitcoin Impact Index measures which groups of Bitcoin holders are under financial stress, how severe that stress is, and whether it’s severe enough to shake confidence in the market’s direction. It combines on-chain holder behaviour, ETF and derivatives activity, and exchange-level liquidity flows into a single weekly score between 0 and 100. Unlike sentiment indicators, it deliberately excludes social media and volume data to focus on what participants are doing rather than what they are saying.
Score bands:
- Normal Rotation (0–24) — routine profit-taking, no structural shift
- Elevated Repositioning (25–49) — specific groups shifting positions, pressure uneven across the market
- High Impact (50–74) — broad stress across multiple holder groups and institutional flows simultaneously
- Critical Impact (75–100) — full capitulation: LTH losses, large ETF outflows, major liquidations, and heavy exchange inflows at once
Week 31 (July 27 – August 2): BII 45.3 — Elevated Repositioning
Negative signals: long-term holders are distributing while liquidity continues shrinking
Long-term holder supply declined by roughly 77,000 BTC over the past week, accompanied by a more than 50% weekly increase in spent volume among long-term holders. This suggests that some experienced investors used recent price recovery as an opportunity to distribute into weakness, putting additional pressure on Bitcoin’s price. This doesn’t mean that long-term holders have lost their conviction, but it suggests they are becoming increasingly cautious and may be positioning for further price declines.
Liquidity conditions also deteriorated. Stablecoin reserves held on exchanges declined by approximately $3.66 billion during July, dropping to their lowest level since May 2025. This reduces the amount of readily available capital that could support a stronger recovery. Historically, stablecoin reserves tend to stabilize or recover during bottom formation, hinting that Bitcoin may still have room for downward movement.
Short-term holders also deepened their losses, with realized P/L falling to –0.604 and absorbing what long-term holders are selling. Such a dynamic is typically not a sign of healthy accumulation.
Negative signals: ETF investors are under record pressure
ETF investors are also facing increasing pressure. The proportion of ETF inflows currently sitting at a loss climbed to 88.5%, a new all-time high, indicating that most money that entered Bitcoin ETFs since they launched is deeply underwater. That creates a specific dynamic: investors sitting at a loss are typically more reluctant to increase their exposure, which may explain why ETF inflows remain minimal.
Mixed signals: Bitcoin dominance in crypto trading volume became the largest since 2023
Bitcoin saw increased attention from crypto traders throughout July. Its share of the total cryptocurrency trading volume climbed to 42.9%, the highest level since Q1 2023.
Historically, rising Bitcoin trading dominance has often appeared during the later stages of bear markets, as capital rotates away from higher-risk altcoins and into Bitcoin. While this trend does not necessarily signal an immediate recovery, it may help reduce selling pressure on BTC relative to the broader crypto market.
However, seasonal trends still call for caution. August and September have historically been the weakest months for Bitcoin and the broader crypto market. While this raises the risk of short-term downside, the strength in Bitcoin dominance suggests that a potential pullback could be limited.
What could happen next
Bitcoin is struggling to reclaim the 200-week SMA near $63,500, and the near-term path depends on whether it can recover above that level quickly. The four-hour chart and lower timeframes suggest a retest of $64,000. If $64,000 holds, the asset may try to break $68,000 where the short-term holder cost basis sits. Breaking $68,000 cleanly without a large wave of selling from short-term holders currently at a loss would be a significant signal that the market structure is improving.
If the breakout above $64,000 fails, $62,000 and $60,000 could become the next potential support levels. The 200-week SMA failing as support in 2022 extended that bear market by months. That precedent is worth keeping in mind while the current test plays out.
Stablecoins remain the clearest weak spot. Exchange reserves continue to decline, reducing the buying power available to support higher prices. Until those reserves begin growing again, rallies are more likely to be temporary than to mark the start of a sustained recovery.
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