Bitcoin recently saw a remarkable surge, briefly climbing above $97,000 and reaching its highest price point since late last year. This isn't just a fleeting moment of speculation; it signals a potentially significant shift in how capital interacts with this leading digital asset. Beneath the surface, a confluence of powerful forces, ranging from renewed institutional demand to a rare market phenomenon known as a 'gamma squeeze,' are painting a picture of an asset undergoing a structural re-evaluation.
The flagship cryptocurrency's strong start to the year has pulled the broader market along for the ride. However, this upward momentum isn't happening in a vacuum. Instead, it is underpinned by critical on-chain metrics that reveal a growing appetite from major players, coinciding with a sudden reluctance from existing holders to sell. Let's delve into the core reasons why Bitcoin finds itself in such a robust uptrend.
The Power of Spot Demand and Institutional Inflows
One of the most immediate and impactful drivers behind Bitcoin's recent price appreciation has been a sharp acceleration in inflows to US spot Bitcoin Exchange Traded Funds (ETFs). Data from Coinperps highlighted that the 12 Bitcoin ETF products collectively attracted over $1.5 billion in just two days. These aren't merely large figures; they carry significant mechanical weight.
Post-halving, Bitcoin’s new issuance stands at roughly 450 BTC per day. At current prices, this represents a relatively modest dollar figure when compared to the substantial demand implied by high-inflow ETF days.
While ETF flows aren't the sole source of spot buying, nor do they always translate directly to immediate 'market buys,' they serve as a highly visible and regulated conduit that can swiftly pull incremental demand into the market. This mechanism is particularly effective when institutional allocators rebalance their portfolios or when broader 'risk-on' flows make a comeback in financial markets. This dynamic has elevated ETF flow data to a daily, macro-like signal for the entire crypto sector, helping to explain Bitcoin's ability to rise even when crypto-native narratives are quiet.
Further reinforcing this narrative of spot-led strength, data from CryptoQuant indicates that the move was not initially driven by leverage, but by genuine demand for the underlying asset. The firm’s 90-day Spot Taker CVD, a metric indicating whether buy volume consistently outweighs sell volume, turned positive around the $86,000 mark. Moreover, the quality of this buying was distinct. Spot Average Order Size flashed 'Whale Orders' during this period, signaling that larger entities, rather than dispersed retail speculation, were leading the charge through direct spot purchases.
Why Long-Term Holders Aren't Selling
The second crucial element underpinning Bitcoin's ascent is the notable absence of relentless profit-taking. Glassnode's recent market analysis revealed a significant drop in realized profit from the elevated levels observed in the prior quarter. Specifically, the 7-day moving average of realized profit for long-term holders of BTC plummeted to approximately $183.8 million per day, a stark contrast to levels above $1 billion per day seen in late 2025.
This reduction in selling pressure is vital because Bitcoin rallies require not only new buyers but also a diminishing number of eager sellers. When the intensity of profit-taking fades, even moderate demand can propel the price higher, as the market isn't constantly replenished with supply from holders locking in gains.
This reluctance to sell is further evidenced by the Value Days Destroyed (VDD) indicator. This metric calculates the number of days bitcoins remained inactive before being moved, weighted by the amount of BTC transferred. A low VDD typically implies younger coins are being moved, while a high value suggests older, long-held coins are being spent. Currently, the VDD stands at approximately 0.53 as of January 2026, a historically low level. This reading strongly suggests that the BTC being transferred across the network is relatively young, with older, more established coins remaining untouched.
Historical cycles suggest that a rising Bitcoin price combined with a muted VDD reading signals a robust expansion phase. In such an environment, incoming demand doesn't need to contend with a structural wall of selling, allowing bids to lift prices much more efficiently. Therefore, the current breakout above resistance is profoundly supported by the inactivity of long-term holders, reinforcing the idea that genuine market strength, rather than fragile short-term speculation, is driving the asset.
Derivatives Fuel the Fire: The 'Gamma Squeeze' Explained
The third major accelerant to Bitcoin's price action comes from derivatives positioning. As Bitcoin pushed upward, the market witnessed a wave of short liquidations. These are essentially forced buybacks by traders who were betting against the price increase. Such events can create abrupt 'air pockets' as stop-loss orders are triggered and liquidations cascade, contributing to rapid price spikes. Glassnode data confirmed that the latest move sparked the largest short liquidation event since October 10 across the top 500 cryptocurrencies.
Beyond the headline liquidation tally, a more structural shift occurred in the options market. Glassnode also noted the largest-ever options open interest reset around the late-December expiry. Open interest plummeted from 579,258 BTC to 316,472 BTC, a reduction of over 45%. For market observers, options open interest is crucial because it directly influences how market makers hedge their risk.
Significantly, Glassnode flagged that dealer gamma was short in the ~$95,000–$104,000 zone. This specific setup is key to understanding the 'gamma squeeze' phenomenon. When dealers are short gamma, they need to buy more of the underlying asset as its price rises to maintain a delta-neutral hedge. This creates a feedback loop: price rises, dealers buy, which pushes the price higher, forcing more dealer buying. This aligns hedging flows with the upward price movement, amplifying the rally rather than dampening it. In simpler terms, the rally not only attracted new buyers but also forced additional buying through liquidations and hedging behavior once key price levels were challenged. Meanwhile, CryptoQuant data confirms that futures participation arrived later in the sequence and was predominantly retail-driven, aligning with and confirming the spot-led upward trend.
Macroeconomic Backdrop and Policy Shifts
Bitcoin does not exist in isolation, and the broader macroeconomic environment provided a friendlier backdrop this week. The latest US CPI release showed headline inflation at 2.7% year-over-year in December, with core CPI at 2.6% year-over-year. On a monthly basis, headline CPI was a modest 0.3% (seasonally adjusted).
Markets typically interpret these figures through a simple lens: does inflation pressure keep real yields elevated and financial conditions tight, or does it allow risk appetite to expand? While real yields remain historically significant, a softer inflation impulse can reduce the odds of further tightening shocks from central banks, which often provides support for high-beta assets like Bitcoin. Bitcoin’s sensitivity to macro factors varies, but in periods where crypto trades as a 'risk-on' proxy, reduced inflation anxiety can be sufficient to support a rebound, especially when combined with strong spot flows and favorable positioning.
Additionally, an evolving US policy conversation around crypto market structure is quietly contributing to the positive sentiment. US lawmakers are framing the CLARITY Act as an important piece of legislation that seeks to create clearer boundaries between regulatory agencies and curb 'regulation-by-enforcement' dynamics. Although the legislation has garnered mixed reactions from various market stakeholders, many industry players agree that the bill could ultimately be positive for BTC by fostering a friendlier regulatory regime that helps compress the asset's risk premium.
What's Next for Bitcoin? Navigating Resistance
The critical question now is whether Bitcoin can sustain this powerful rebound and convert it into a lasting upward momentum. Glassnode highlights the Short-Term Holder (STH) cost basis, currently around ~$99,100, as a key threshold. The logic is straightforward: when recent buyers are at breakeven or in profit, they are less inclined to sell defensively on minor pullbacks, which in turn boosts confidence among momentum traders.
However, Bitcoin is simultaneously entering an overhead supply zone, a range where many buyers’ cost bases are clustered. Glassnode identifies this broad overhead range as roughly $92,100 to $117,400. This implies that as the price moves higher, it may repeatedly encounter cohorts of holders who are eager to sell into strength, particularly those looking to break even after previous dips. This dynamic presents two plausible paths for Bitcoin:
- Continuation Scenario: If ETF inflows remain consistently positive and the price firmly reclaims ~$99,000, the market could gradually grind higher, absorbing selling pressure as it progresses. This scenario would be further supported if derivatives hedging behavior continues to align with the upside momentum.
- Failure Scenario: Conversely, if the price repeatedly rejects below the STH cost basis, and the macroeconomic environment tightens with higher real yields, the current move risks resembling another range-bound rally that eventually exhausts itself as overhead supply re-emerges.
The coming days and weeks will be pivotal in determining which path Bitcoin ultimately takes, as the forces of demand, supply, and market mechanics continue to play out.
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