On-chain analysis week 33/2026: Bitcoin in a new financial lifeline.

Analyst Research Team

Group On-chain HCCVenture

Market Summary

The Coldcard security incident in late July was a notable test of long-term supply behavior. Initial reports indicated around 594 BTC were stolen, but the total loss was later updated to over 1,000 BTC , equivalent to approximately $89 million, affecting over 1,000 wallets. Therefore, the 594 BTC figure should not be used as the final scale of the event.

The amount of old coins reactivated surged as users moved assets to new wallets to reduce risk, but this increase did not translate into a wave of selling pressure in the market. While a security shock could potentially increase the movement of old supply without generating corresponding selling pressure, the market is demonstrating relatively good absorption of negative information. However, this also reflects another reality: the market currently lacks both strong selling and strong active buying pressure . Prices therefore tend to react limitedly to individual shocks.

However, it's important to avoid interpreting supply scarcity as an immediate bullish signal. Unless new demand has increased significantly enough, the locked supply only reduces two-way liquidity and prolongs the accumulation process. Therefore, the current situation is more consistent with the concept of "valuation being rebuilt" rather than "Bitcoin has entered a new uptrend."

The macroeconomic environment has also not yet created a sufficiently strong liquidity boost for Bitcoin. On July 29, 2026, the US Federal Reserve kept its target interest rate at 3.50–3.75% , while three members voted in favor of a 25 basis point increase. The Fed also assessed inflation as still above its 2% target, meaning monetary conditions cannot yet be considered truly easing. When the real cost of capital remains high, new capital flows tend to favor assets with the potential to generate cash flow or with clearer profit drivers. Bitcoin therefore needs a simultaneous improvement in global liquidity and institutional investment demand to shift from a state of supply shortage but insufficient demand to a state of supply shortage and accelerating demand .

Analyzing on-chain metrics

Bitcoin Momentum vs. USD Breadth Impulse reflects the extent to which momentum in the USD market expands or contracts, providing an additional layer of macroeconomic data for assessing Bitcoin's momentum, which has shown significant improvement from the deep consolidation phase in the first half of 2026. However, the current improvement has only brought the indicator back into positive territory and remains significantly lower than previous periods of strong liquidity expansion.

In early 2024, the USD Breadth Impulse briefly reached positive levels above +40 , peaking at approximately +47 , reflecting a very strong expansion in USD market breadth. Subsequently, the indicator continuously shifted between positive and negative zones before entering a prolonged weakening cycle in the latter half of 2025 and early 2026.

Following the March low, the indicator began to form a recovery pattern. Momentum returned to positive territory in April-May, then weakened again in June-July. However, the most noteworthy point lies in the final data bars : the indicator has returned to positive territory and formed levels around +2, +6 to nearly +9 , suggesting that USD momentum is improving after a prolonged contraction cycle. While the current performance is significantly more positive than the low around -29 , the scale of the recovery remains relatively small compared to previous expansion cycles.

However, current data does not yet show a sufficiently strong synchronous expansion; the indicator has just crossed back above zero, while previous positive peaks are usually accompanied by stronger acceleration phases for Bitcoin. Therefore, the current signal is more consistent with a transition from unfavorable to supportive macroeconomic conditions , rather than a confirmation signal that Bitcoin has entered a new acceleration phase. Long-term supply remains high, inflows/outflows of coins remain low, and selling pressure has not yet formed a large-scale distribution cycle; meanwhile, the USD Breadth Impulse has emerged from deep negative territory. Therefore, the current structure is leaning towards a positive recovery and revaluation , rather than a continued extension of a bear market.

The Bitcoin Price and CME Participation indicator is designed to assess the level of capital participation in the CME futures market through the Participation Index Average Z-Score , thereby determining whether institutional participation is expanding or contracting compared to historical levels. After the Participation Index reached highs in late 2024 – early 2025, the indicator formed a prolonged downtrend and is now approaching the reference zone of 0, while Bitcoin remains around the $60,000-$65,000 range . Bitcoin's price has not returned to the lows of the previous cycle, but the relative participation of the CME market has fallen to its lowest point in the entire recent observation period.

From late 2023, the Participation Index began to recover alongside Bitcoin's rebound. Notably, in 2024, the indicator repeatedly surpassed 2.0 and peaked above 3.0 at the end of 2024, the highest level of the entire recent period and occurring just before Bitcoin entered its acceleration phase towards $100,000. Cyclically, this is evidence that the expansion of CME activity played a significant confirming role in the expansion of Bitcoin's valuation.

However, the structure completely changed since the beginning of 2025 when the Participation Index shifted to a prolonged downtrend, falling from above 2.0 to around 1.0 in the latter half of 2025, before continuing its sharp decline in 2026. By the end of the chart, the indicator was only fluctuating around 0 and at times even below 0 , significantly lower than its previous peak above 3.0.

A sustained uptrend typically requires a combination of rising prices and increasing market participation. When prices rise while the Participation Index also rises, the market is showing confirmation from capital flows and trading activity. Conversely, when prices remain high but the Participation Index continuously declines, the quality of the price trend becomes weaker because the level of participation in the institutional derivatives market is no longer expanding proportionally.

The Bitcoin Price and US M2 Growth relationship reflects the correlation between the growth rate of the US M2 money supply and Bitcoin price movements. While M2 isn't a variable that can accurately determine short-term BTC prices, it's one of the most important measures of nominal liquidity in the financial system. As the M2 growth rate shifts from contraction to expansion, the amount of available liquidity in the economy tends to improve, thereby creating more favorable conditions for liquidity-sensitive assets like Bitcoin.

The latest data shows that the US liquidity structure is shifting to a more pronounced expansionary state compared to its 2023 low . Seasonally adjusted M2 reached approximately $23.155 trillion in June 2026 , up from $22.621 trillion in February and $22.355 trillion at the end of 2025. Compared to $21.943 trillion in June 2025, M2 is now up approximately 5.53% year-on-year . This is a significant change when compared to the period of negative M2 growth in 2023.

If we use the M2 growth bottom of approximately -4.5% in 2023 as a benchmark, the current level of around +5.5% indicates that liquidity conditions have improved by about 10 percentage points . During the same period, Bitcoin has risen from around $16,000 to approximately $65,000 currently, which is about four times higher than the cycle bottom .

However, Bitcoin remains significantly below the peak above $120,000 shown in recent price movements, creating a notable structure: nominal liquidity has recovered to historical highs while Bitcoin price remains below the cyclical peak . Bitcoin is not currently facing liquidity conditions similar to the 2022–2023 period. Conversely, the monetary foundation is supporting the possibility of forming a higher valuation zone in the medium term, especially if the M2 growth rate continues to remain above 4–5% and does not return to a downturn.

The Bitcoin Reflation Composite is a composite indicator used to assess the state of re-inflation in the macroeconomic environment for Bitcoin. Unlike a single indicator such as M2, CPI, or bond yields, this composite is valuable because it reflects the simultaneous changes in multiple economic conditions related to liquidity, nominal growth, and price pressure . After repeatedly exceeding the 0.8 level, defined as "moderate reflation ," the index quickly fell below 0 and is currently fluctuating around -0.8 , which is right within the "moderate disinflation" zone .

However, the current level has not yet replicated the extreme decline of 2022, when the Reflation Composite fell to around -1.6 , nearly 0.8 points lower than the current level. Therefore, the current data reflects a marked weakening of reflation dynamics , but does not yet confirm an extreme macroeconomic deflationary state equivalent to the bottom phase of the 2022 cycle.

In the context of Bitcoin, this shift explains why BTC pricing may be under pressure even as some nominal liquidity variables continue to improve. Bitcoin reacts not only to absolute liquidity but is also sensitive to the rate of change in liquidity conditions and nominal growth . As reflation momentum weakens, the pricing premium for risky assets tends to narrow, so the current -0.8 level should be seen as a warning zone regarding macro dynamics, but not yet a confirmation signal of a new cyclical bottom for Bitcoin .

In its July 2026 Monetary Policy Report, the Federal Reserve stated that PCE increased 4.1% year-on-year in May , while core PCE rose 3.4% , both significantly higher than a year earlier. The Fed also assessed that inflation remains above its long-term target of 2%, while the economy continues to grow. For Bitcoin, changes in momentum typically influence pricing before absolute inflation levels change significantly.

Currently, the indicator is at around -0.8 , precisely in the middle of the two extreme states mentioned above. Therefore, the current structure is more consistent with a valuation rebalancing phase rather than an extreme speculative state or a liquidity crisis. In particular, the sharp decline of the composite from above 1.0 to -0.8 while not yet breaking below -1.6 suggests that the current macroeconomic weakness is significant but has not yet reached the scale of the 2022 shock .

Specifically, the sharp drop in the composite from above 1.0 to -0.8, while not yet breaking below -1.6, indicates that the current macroeconomic weakness is significant but has not reached the scale of the 2022 shock . During the 2021–2022 period, the 30-day correlation repeatedly moved up to the 60–80% range , with the highest point on the chart approximately 80% . At that time, Bitcoin reacted relatively synchronously with the movements of US stocks and was directly influenced by changes in global risk appetite.

Current market data shows a BTC–S&P 500 correlation of approximately 0.39 from an independent source, equivalent to 39%, higher than the 29.6% shown on the HCCVenture chart due to differences in timing and calculation methodology. During the 2021-2022 period, the 30-day correlation repeatedly moved into the 60–80% range , with the highest point on the chart being approximately 80% . At that time, Bitcoin reacted relatively synchronously with the movements of US stocks and was directly influenced by changes in global risk appetite.

More importantly, historical charts show that the BTC–S&P 500 correlation has repeatedly fallen into negative territory , at times around -40% to -60% . Compared to these lows, the current 29.6% level is still significantly higher. This suggests that the market has not yet entered a state of complete divergence between Bitcoin and US stocks; instead, the relationship is in a weakly positive correlation and fluctuates according to macroeconomic conditions .

The current price divergence is more significant than the correlation figures alone. The S&P 500 set a new record closing high last week and continues to hover around 7,400 points , while Bitcoin is only fluctuating around $64,000–$65,000 , significantly below its all-time high of over $120,000. Reuters also noted that the S&P 500 reached a record closing high last week, while the market is focusing on inflation data and the outlook for US monetary policy.

The decline in correlation does not mean Bitcoin has completely detached from the traditional financial system. Conversely, long-term research data suggests that Bitcoin's correlation with the S&P 500 has slightly increased following the approval of spot Bitcoin ETFs, with the average correlation estimated to have risen from approximately 0.36 to 0.39 . However, the research also found no evidence of a significant statistical structural breakdown following the ETF event.

The adjusted MVRV on the chart is currently around 0.6–0.7 , significantly lower than the Base Line at 1.0 and particularly far from the Bubble zone at 1.45 . However, the current structure does not yet fully correspond to major cyclical lows. In the periods of 2015, 2018–2019, and 2022–2023, the adjusted MVRV experienced deep crash zones, with lows near 0.5 often coinciding with periods when Bitcoin formed long-term bottoms. Therefore, the current data suggests that Bitcoin is in a low valuation zone within its cyclical structure, but has not yet reached the most extreme valuation state of previous bearish cycles.

In previous bull cycles, the Adjusted MVRV typically expanded rapidly as the price of Bitcoin rose far beyond its realized value base. The 1.45 line on the chart is identified as the Bubble threshold; when the indicator moves above this area, the market enters a valuation phase with a significant deviation from the realized value.

When the Adjusted MVRV is above 1.45, the market is in the Bubble zone and the risk of a valuation correction is high. When the indicator falls to 1, the market returns to near equilibrium. When it falls to 0.5–0.7, the market enters a zone where the valuation premium has been significantly compressed . This means that the current price is no longer supported by an expanding MVRV like during the peak of the cycle. Conversely, the gap between market value and realized value has narrowed, significantly reducing the risk of overvaluation compared to 2024–2025 .

The HCCVenture chart shows that the MVRV Z-Score has undergone a particularly strong valuation contraction in 2026. After reaching highs in 2024–2025, the indicator has continuously declined and is now only around 0.3–0.4 , very close to the Base Line and historical accumulation zone. Market data for July 2026 also recorded the MVRV Z-Score at approximately 0.36–0.42 , the lowest level since the 2022 bear market.

The most important point isn't that the indicator is below average, but rather the vast gap between the current state and the extreme valuation zones that appeared in previous bull cycles . This suggests that much of Bitcoin's valuation premium has been eliminated, shifting the market from a valuation expansion to a compression and valuation rebalancing phase .

Data from July 2026 recorded an MVRV Z-Score of approximately 0.42 , while other sources recorded around 0.36 or lower depending on the time. The important thing is not the small difference between sources, but the fact that all placed the indicator in the region below 1 , far below the overvalued levels of previous cycles. In this context, the current price of around $64,000-$66,000 is trading with a relatively small premium compared to the cost basis of the entire network. This significantly alters the valuation risk structure: the risk of Bitcoin being overvalued has sharply decreased , while the margin for correction needed to bring the market back to the extreme states of historical lows has narrowed.

The gap between the two states indicates that the valuation premium has been heavily compressed . Bitcoin is no longer trading on the basis of a large unrealized market gain. Conversely, the market is approaching a region where realized value becomes the dominant factor in valuation. This is an important signal for cyclical assessment: the MVRV Z-Score no longer reflects an overheated market but rather a market that has undergone a deep valuation correction.

Short-Term Holder MVRV (STH-MVRV) is currently in a particularly noteworthy state, with its market price around $64-$65,000 lower than the STH Realized Price of approximately $67,500-$68,000 , bringing STH-MVRV down to around $0.95 . Thus, investors who bought BTC in the last 155 days are experiencing an average unrealized loss of approximately 5% .

This is a significant difference from the period around mid-2025, when the BTC price consistently stayed above the STH Realized Price and STH-MVRV remained in the high-profit zone. When the market price is above the cost basis, new investors tend to maintain positions with unrealized profits; conversely, when the price falls below the cost basis, the incentive to hold weakens and selling pressure may increase as investors seek to cut losses or exit positions.

Although STH-MVRV is currently below 1, historical data also shows that the indicator has experienced significantly deeper declines. During the previous sharp correction, STH-MVRV reached approximately 0.79 , corresponding to an unrealized loss of about 21% for short-term investors. Compared to the current level of 0.95, the difference is 0.16 points , equivalent to about 20% from the bottom of 0.79 . Therefore, purely considering the depth of the indicator, the market has not yet reached an extreme stress state for STH . Consequently, the current structure reflects a weakening of profitability , not a complete surrender of the STH group.

The Four-Week Bitcoin Returns by Participation Level assesses the relationship between the level of market participation breadth and Bitcoin's returns over the next four weeks . As the participation level increases significantly, the four-week distribution of Bitcoin returns widens considerably, but is no longer linearly upward . Observations in the highest participation range, approximately 1.5–3.1 , show both very large positive returns and significant negative returns.

The right side of the chart, corresponding to participation levels of approximately 1.5–3.1 , contains the majority of highly volatile observations. Here, 4-week profit levels of +25%, +40%, and even close to +50% appear , but at the same time, negative levels of around -15% to -40% also occur .

Conversely, the group with lower participation levels, primarily ranging from around -0.25 to 0.5 , has a more concentrated profit distribution around 0%. Extreme increases and decreases occur significantly less frequently. Therefore, historical data suggests that participation breadth has a clear relationship with profit distribution range ; that is, when the market has wider participation, Bitcoin is more likely to generate larger 4-week swings. Increased participation does not necessarily mean increased returns , but rather reflects that the trend is gaining wider participation and therefore has the potential to create a more volatile market state.

For Bitcoin currently, this is particularly noteworthy because recent HCCVenture data shows that spot participation remains relatively weak, while ETF inflows have shown signs of improvement, suggesting that market participation is shifting towards institutionalization , rather than simultaneously expanding across the entire investor ecosystem.

The Leverage-Money Crowding Percentile measures the concentration of leveraged money in Bitcoin on a 3-year percentile basis. After falling to near the 0–5th percentile in 2024, reaching its lowest point in the entire recent observation period, the indicator continuously recovered in 2025 and accelerated sharply from the beginning of 2026. Currently, the percentile has returned to approximately 90–95% , meaning the level of leveraged money crowding is higher than about 90% of observations over the 3-year window .

Quantitatively, the 90-100th percentile region in the chart appears relatively infrequently. The most prominent period before was late 2022 to early 2023, when the indicator consistently advanced to 80-100% . After that, leverage crowding decreased sharply and eventually fell to near 0% in 2024. Notably, the current level is approaching the very peak that occurred during the 2022–2023 cycle. This suggests that structural risk from leverage has returned to high levels , although it has not yet reached the sustained peak seen in early 2023.

The key difference is that the pace of crowding formation in 2026 is significantly faster than in the 2024–2025 period. When a market moves from a percentile near 0 to above 90 in a relatively short time, the accumulated leveraged positions can become a source of volatility amplification, not implying a specific price direction, but indicating that the market's sensitivity to liquidity shocks has increased significantly .

The CME Asset Managers vs. Leveraged Funds chart reflects the divergence in positions between two key groups of institutional investors in the Bitcoin futures market: Asset Managers/Institutional and Leveraged Funds . According to the CFTC classification, Asset Managers represent asset managers/institutions, while Leveraged Funds include funds using leverage strategies such as hedge funds and relatively active institutional traders.

Asset Managers maintain a positive net position, while Leveraged Funds continue to maintain a high level of negative net position . This is not a new phenomenon in 2026, but the current degree of divergence is becoming noteworthy after both groups experienced significant position shifts during the 2024–2026 cycle.

After peaking, Asset Managers' positions have adjusted significantly. From above 40% in 2024, the indicator declined to around 20% in late 2024–early 2025 and continued to weaken in 2026. Currently, the indicator line is only around +10% , significantly lower than its peak of nearly 50% in 2024. However, the important point is that the indicator has not returned to negative territory . This suggests that although the level of aggressiveness among Asset Managers has sharply decreased from the cycle peak, this group still maintains a positive net position structure. From an institutional positioning perspective, this signals that institutional demand has not completely reversed to a defensive stance .

The most recent verifiable CFTC data also reflects a similar structure. For Bitcoin futures on the CME in the report dated July 14, 2026, Asset Managers held 4,779 long contracts compared to 1,964 short contracts , not including 194 spread contracts, corresponding to a net long position of approximately 2,815 contracts . With open interest of 19,385 contracts, this size is equivalent to approximately 14.5% open interest when calculated based on the long-short spread.

Our assessment and conclusions

Bitcoin is no longer in a pricing state dominated by capitulation from holders , but it also hasn't fully exhibited the characteristics of an overheated pricing zone corresponding to previous cyclical peaks. The supply of inactive BTC remains high in the long term, the amount of Bitcoin flowing into and out of exchanges has decreased sharply, while the total amount of BTC held by whale groups has recovered from its low point at the end of 2025. The exchange balance is currently almost flat around 3.3 million BTC , and both inflows and outflows have decreased to approximately 21,000 BTC/day , reflecting relatively low liquidity on the exchange.

STH-MVRV is currently around 1.0–1.1 , significantly lower than the 1.25–1.35 range seen during strong growth phases. With a price of approximately $65,000–$67,500 on the chart, the Short-Term Holder Realized Price is becoming an important reference point for short-term valuation structure. The fact that STH-MVRV has not yet returned to the 1.25–1.35 range suggests that short-term holders have not yet achieved sufficient profits to create profit-taking pressure equivalent to previous peaks.

The Liquidity Inventory Ratio indicator also shows a similar characteristic. Liquidity available for sale on exchanges has decreased to lows in the cycle, while demand from accumulators persists. When the tradable supply decreases under conditions of stable demand, the elasticity of supply with respect to price decreases; in other words, a relatively small amount of new demand can have a greater impact on price than during periods of abundant liquidity .

ETF flows and positioning on the CME are improving , confirming the return of institutional capital flows, but have not yet created an extreme euphoric state. Notably, current CME data needs to be read in conjunction with the basis/arbitrage structure, as not all futures flows represent directional demand. This makes the institutional signals positive in quality but still need to be evaluated based on actual capital flows and their sustainability.

The fact that Leverage-Money Crowding Percentile has advanced to the 90-95% range, while MVRV and STH-MVRV are not yet at extreme levels, creates a rather unique structure: fundamental valuation isn't overheated, but the position structure has become more volatile . Therefore, the short-term correction risk mainly stems from the release of leverage rather than from a large-scale on-chain distribution. Consequently, considering the entire indicator system, Bitcoin's valuation in the next phase is leaning towards an upward revaluation with high volatility risk , rather than a completed bubble. In financial analysis terms, fundamental valuation hasn't yet shown overvaluation, but market positioning has begun to become expensive in terms of risk .

Disclaimer

This report was prepared by HCCVenture Research with the aim of providing information, research, and market analysis. The entire content of the report is based on publicly available data, on-chain data, market data, venture capital (Venture Capital) data, macroeconomic data, and HCCVenture's internal research methodologies at the time of publication. Data sources are compiled from numerous reputable research platforms and organizations, including but not limited to Glassnode, CoinGecko, TradingView, Dune Analytics, CoinGlass, CryptoRank, RootData, PitchBook, DefiLlama, CryptoQuant, Messari, Token Terminal, Artemis, CoinMarketCap , public blockchain data, reports from financial institutions, investment funds, blockchain companies, and other publicly available information sources. HCCVenture strives to select reliable data sources and applies a verification and cross-checking process throughout its research. However, HCCVenture does not guarantee the completeness, accuracy, timeliness, or error-free nature of all data due to differences in statistical methods, data collection scope, update times, or adjustments from data providers.

All opinions, assessments, valuation models, cyclical analysis, on-chain data, capital flow analysis, Venture Capital activity, ETFs, Digital Asset Treasury Companies (DATs), technical indicators, macroeconomic indicators, and scenarios presented in this report reflect only the research views of HCCVenture Research at the time of publication, based on available assumptions and data. These contents are not investment advice, financial advice, legal advice, accounting advice, tax advice, brokerage advice, portfolio management advice, or recommendations to buy, sell, or hold any digital asset, security, financial product, investment fund, blockchain protocol, or business. The digital asset and blockchain markets are highly volatile and are influenced by global liquidity, monetary policy, regulatory regulations, macroeconomic conditions, and many other unpredictable factors. Therefore, the trends, patterns, correlations, or historical cycles mentioned in this report are not guaranteed to repeat in the future and should not be considered reliable predictions of market developments. Readers should conduct their own independent research ( DYOR – Do Your Own Research ) and consult with qualified financial, legal, tax, or investment professionals before making any decisions. Any investment decisions or actions arising from the use of information in this report are the sole responsibility of the reader.

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