Bitcoin sees declining volume amid rising bearish market sentiment

• Bitcoin's decline is fueled by a lack of conviction from investors, with selling pressure on the rise.
• BTC's spot and futures volumes decreased, pointing to rising bearish pressure across the market.
• Bitcoin tipped slightly higher over the past 24 hours, rising above $110,000.

Bitcoin (BTC) traded near $110,000 in the early Asian session on Tuesday as declining spot and futures volumes coupled with strained on-chain activity signal rising bearish pressure.

Bitcoin sees a wave of bearish pressure as investors exercise caution

Bitcoin's consolidation around $110,000 comes amid a rise in bearish pressure across the market, on-chain analytics firm Glassnode stated in a report on Monday.

The report stated that Bitcoin’s Relative Strength Index (RSI) dropped from 37.4 to 33.6 last week, slipping into oversold territory and signaling growing selling pressure. Glassnode analysts added that spot trading volumes declined nearly 9% to $7.7 billion, indicating weaker investor participation and uncertainty in market sentiment.

“Lower volumes during price moves often reflect weaker conviction or bias behind the recent trend, pointing to uncertainty in market sentiment,” the analysts stated. “The subdued participation suggests bearish pressures continue to dominate the market backdrop."

A similar sentiment is evident in Bitcoin futures and options open interest, which declined over the past week, a “shift toward risk-off behavior” following Bitcoin’s pullback from recent highs.

In addition, Glassnode highlighted a greater influence from short-term holders (STH) in the market, as STH-to-LTH supply ratio rose from 17.0% to 17.7%. This signals a more volatile market environment, as STHs are often more likely to display speculative behaviour and take more reactive trades.

The slight increase in bearish pressure comes amid strong purchases from Bitcoin treasury companies and US spot exchange-traded funds (ETFs), which reversed close to $1 billion in outflows to register inflows of $396.0 million last week.

Meanwhile, despite recent declines, CryptoQuant analyst Carmelo Alemán suggests that the market is yet to hit a cycle top. Alemán stated that prior Bitcoin bull cycles have been marked by significant price corrections before a surge to new highs, making this pullback a seemingly healthy one.

Bitcoin's institutional adoption, coupled with growing interest in tokenization, could help push its price higher in the coming months, Alemán added.

Using the Network Value to Transaction (NVT) ratio, a metric that compares Bitcoin's market cap with on-chain transaction volume, Alemán indicated that Bitcoin has held below 50 since July 7, reflecting strong network activity and growth potential. 

He further emphasized that Bitcoin's Market Value to Realized Value (MVRV) indicator is yet to reach levels typically known to be cycle peaks, indicating that prices “has not yet entered an overheated phase.”

Bitcoin is changing hands at $110,300 in the early Asian session on Tuesday, recovering from a slight decline toward $107,000.