Recent on-chain data reveals a significant stress point in the Bitcoin market, with short-term holders experiencing a level of unrealized loss not seen since the FTX collapse. However, a deeper look shows this is primarily a shake-out of recent buyers, while the market’s underlying structure appears more resilient than in past downturns.
Short-Term Holders Feel the Heat
The pressure on recent Bitcoin buyers is substantial. Data shows that short-term holders—wallets that have held BTC for less than 155 days—are collectively sitting on a loss for approximately 2.8 million BTC. This is the largest volume of coins held at a loss by this group since the market crisis in November 2022.
This situation arises because Bitcoin has fallen about 25% from its October peak, dropping below the $104,000 price level. Since anyone who bought Bitcoin in the last five months paid more than the current price, nearly all of these recent acquisitions are now “underwater”. This has contributed to a wave of forced selling, with one report noting $1.1 billion in liquidations in a 24-hour period, the majority from long positions.
A More Resilient Market Structure
Despite the pain for short-term traders, several factors suggest the market is on a firmer foundation than in previous cycles.
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Long-Term Holders are Taking Profits, Not Panicking: The current dynamic is characterized by long-term holders distributing their coins—a typical behavior in a bull market where investors realize gains after a long period of accumulation. This is different from the panic selling seen in true bear markets. Analysis indicates this profit-taking mirrors patterns observed in previous bull runs.
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Institutional Participation Provides Stability: The launch of U.S. spot Bitcoin ETFs has introduced a new, stabilizing force. While the price of Bitcoin has fallen 25%, the assets under management (AUM) of these ETFs, measured in BTC, have only decreased by about 3.6% from their October peak. This divergence suggests the recent price drop is not primarily driven by institutional flight through ETFs, but by other factors like long-term holder distribution.
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Analysts See a Cyclical Reset, Not a “Crypto Winter”: Many analysts interpret this turbulence as a healthy correction within a longer-term institutional adoption phase. As one expert from 21Shares noted, the market is experiencing a “cyclical readjustment” (cyclical reset) rather than the start of a prolonged downturn, with the fundamental structure being “much more solid than in previous cycles”.
Key Levels to Watch
For traders and risk managers, the market’s next move will be determined by how it reacts to key technical and on-chain levels.
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Critical Support: Analysts are closely watching the $94,000 level, which represents the cost basis for investors who bought between six and twelve months ago. A sustained break below this level could signal a deeper correction. Other significant support zones are identified around $87,000 and even $74,000.
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Market Sentiment: Investor fear is palpable. The Crypto Fear & Greed Index recently hit a 2025 low of 10/100, plunging into “Extreme Fear” territory. Historically, such extreme fear has sometimes coincided with potential buying opportunities, though caution is always warranted.
In essence, the market is currently in a tense phase where weak hands are being shaken out, but the core institutional framework remains surprisingly stable. The path forward likely depends on Bitcoin’s ability to hold crucial support levels and whether the steady institutional demand can continue to absorb the selling pressure.
