Executive Summary
- The inflow of new demand continues to weaken, with absorbed profit/loss volumes shrinking significantly.
- Locked-in investor profits/losses now resemble levels from late 2024 accumulation periods ($50K-$70K BTC price range).
- Short-term holders (STHs) currently hold the highest quantity of loss-bearing BTC since 2018, yet unrealized losses remain consistent with historical bull markets.
- Long-term holder (LTH) supply is resuming growth, highlighting investor preference for HODLing strategies.
Declining Demand Pressure
Bitcoin's price fluctuates within a newly established $78K-$88K trading range as realized profits/losses contract by 85% ($3.4B → $508M) since its $109K ATH. This mirrors 2024's accumulation phase characteristics:
- Capital Inflows: New buyers purchasing above sellers' cost basis introduce fresh liquidity.
- Capital Destruction: Sales below purchase prices realize losses as new investors acquire discounted coins.
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Holder Behavior Divergence
- STHs account for 100% of loss realizations (newest/most vulnerable investors).
- LTHs dominate profit-taking, benefiting from earlier entry points.
STHs Under Pressure
Recent volatility pushed 3.4M BTC into STH-loss positions—the highest since July 2018. Key observations:
| STH Cost Basis | Price Threshold |
|---|---|
| <24 hours | $89.9K |
| <1 week | $87.6K |
| <1 month | $87.4K |
| 1-3 months | $94.6K |
| 3-6 months | $93K |
90%+ of STH supply is underwater, creating psychological/financial stress comparable to:
- August 2023 downturn
- August 2024 Yen-Carry-Trade unwinding
Unrealized Loss Context
Despite significant STH losses:
- Dollar-denominated unrealized losses remain within typical bull market ranges.
- STHs hold ~40% of network wealth (vs. 70%-90% at past cycle peaks).
Potential explanations:
- Prolonged consolidation periods enabling gradual supply redistribution.
- Stronger HODL conviction among seasoned investors.
- Institutional/ETF participation lengthening investment horizons.
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LTH Supply Cycles
The market exhibits alternating distribution/accumulation phases:
| Cycle | BTC Volume |
|---|---|
| Distribution 1 | -929K BTC |
| Accumulation 1 | +817K BTC |
| Distribution 2 | -1.11M BTC |
| Accumulation 2 | +278K BTC (ongoing) |
Notable trends:
- 3-6 month old coins (future LTH candidates) show declining spending activity.
- LTHs retain ~40% of network wealth.
- Accumulation phases progressively tighten supply.
FAQs
Q: Why are STH losses significant?
A: They indicate new investor stress and potential capitulation risks, historically preceding major trend shifts.
Q: How does LTH accumulation affect prices?
A: It reduces circulating supply, creating upward pressure when demand returns.
Q: What's different about this cycle's wealth distribution?
A: Lower STH wealth concentration suggests more gradual supply redistribution versus previous bull markets.
Conclusion
Bitcoin's current consolidation reflects:
- Weakened but stabilizing demand
- High STH stress balanced by LTH accumulation
- Potential supply tightening for future rallies
Market structure appears healthier than past cycles, with more measured distribution/accumulation dynamics supporting gradual price discovery.
Disclaimer: This report provides educational insights only, not investment advice. Always conduct independent research.