Bitcoin is facing a important test as short-term investors begin aggressively selling their holdings, triggering what analysts are calling a “capitulation” event. The downturn, occurring as the cryptocurrency trades below $90,000 and well below the average purchase price of recent buyers-around $109,000-raises concerns about a potential market reversal, and even the possibility of a prolonged “crypto winter.” market observers are closely watching key price levels and on-chain indicators to determine whether this sell-off signals a temporary correction or the start of a deeper bear market.
Bitcoin (BTC) is experiencing its most significant capitulation episode of the current cycle, with a noticeable increase in loss-selling among short-term investors.
Analysts on-chain suggest these movements could foreshadow a major market reversal, or, in a worst-case scenario, confirm a bear market – often referred to as a “crypto winter” – if certain price levels fail to recover. The recent volatility underscores the inherent risks associated with cryptocurrency investments.
Currently, the price of bitcoin is trading below $90,000, while the cost basis for short-term holders sits around $109,000.
This widening gap reflects a substantial number of participants selling their BTC at a loss compared to their purchase price.
Short-Term Bitcoin Holders Selling in Panic
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On-chain analyst IT Tech warned that short-term investors (STH) “are capitulating.”
His latest study reveals that the realized profit and loss chart for this group – defined as those holding coins for less than 155 days – shows deep red bars, a clear signal of significant loss-selling.
According to the specialist, the deep red bars confirm “intense selling with significant losses.” He also notes a “spike in realized losses comparable to the large corrections of 2021 and mid-2024.”
A critical point, he emphasizes, is that the current price of bitcoin is below the cost basis of short-term holders, which stands at $109,200 and is marked on the chart with a blue dotted line.
The analyst’s conclusion is unequivocal: “STHs are panic-selling, signaling a potential capitulation.”
This type of event often marks a local bottom if the price quickly recovers the cost basis. However, he cautions that “failing to do so historically indicates a deeper downtrend or confirms a bitcoin bear market.”
Technical Signals Align with Capitulation Scenario
The behavior of the Short-Term Holder SOPR (STH-SOPR) indicator, which measures whether short-term bitcoin holders are selling at a profit or a loss, reinforces the idea that the market is facing systematic loss-selling and is flushing out fearful retail investors.
This index fell to 0.97. Values below 1 reflect that sales are occurring below the purchase price.
The latest chart of the indicator shows that, despite the decline in BTC’s price, the metric continued to compress, showing no signs of recovery.
The combination of these factors – increasing realized losses, forced sales, and a persistently negative STH-SOPR – paints a picture of significant selling pressure from short-term holders, potentially pushing the sector toward a bitcoin bear market.
Is This Enough for a Bitcoin Bear Market?
Bitcoin has retreated from recent all-time highs of over $126,000 reached just over a month ago, now trading below $90,000. This price correction has sparked debate among investors.
While the magnitude of the decline might suggest the start of a prolonged bearish cycle, several analysts believe the conditions typical of a crypto winter have not yet been met.
Spanish researcher Carmelo Alemán considers the correction “an artificial fall, a forced fall.” Although long-term holders – those holding their coins for more than 155 days – have increased their sales by 2.81% during the last month, the analyst asserts that this volume is insufficient to generate such a deep price drop, as reported by CriptoNoticias.
Alemán argues that many long-term investors have decided to take profits after months of accumulation, driven more by fatigue than by a structural change in the market.
“They are selling, I believe, because they are tired, because they already have a profit,” he explains. However, he insists that this behavior does not correspond to a typical distribution pattern that usually anticipates prolonged bitcoin bear markets.
This analysis aligns with a study by Glassnode, which indicates that bitcoin is in a “potential zone of demand reactivation,” especially as indicators such as the accumulation by large investors remain elevated.
For CryptoQuant analyst MAC.D, the signal that would officially trigger a prolonged bear market period would be a sustained price drop below $78,500. This threshold corresponds to the average acquisition cost of large holders, who have so far maintained an accumulation trend.
What Needs to Happen Now?
The immediate key remains the cost basis of short-term holders. As long as bitcoin remains below $106,000–$109,000, selling pressure could continue.
According to IT Tech, the market would only avoid a deeper downtrend if the price “quickly reclaims” the cost basis of this group.
If it fails to do so, history suggests that a more prolonged bearish phase could begin, although not necessarily a crypto winter, unless the price breaks the critical level of $78,500 identified by MAC.D.
For now, the capitulation of short-term investors is setting the tone of the market. The coming weeks will be decisive in determining whether the current movement represents a local bottom or the precursor to a more severe bearish trend.
