The price of BTC is waiting for long-term holders or institutional demand to absorb the selling pressure from short-term holders recently.
Since reaching a new all-time high of $109,590 on January 20, the decline in BTC has heightened concerns about the role of institutional investors in maintaining market momentum. Recently, the price of BTC has fallen below $77,000, a 29.7% retracement from the peak, making it the second-largest correction in the current bull market cycle.
Historically, a 30% correction often signals a market rebound, but the current situation indicates that "deep-pocketed investors" have not yet fully absorbed the selling pressure.
Institutional Capital Flows and Market Stability
The adoption of BTC by institutions, driven mainly by spot BTC ETFs and corporate accumulation, has played a key role in reducing the depth of corrections in this market cycle.
The magnitude of past corrections has been between 18% and 22%, highlighting a trend towards milder corrections.
However, the current 29.7% decline suggests a weakening of institutional support. The report points out that over the past five trading days, ETF capital outflows reached $921.4 million, further reinforcing this trend.
Without a new round of buying from institutional investors, BTC may face the risk of prolonged price consolidation or further declines.
Intensifying Selling Pressure
Market data shows that short-term BTC holders (STH), defined as wallets holding BTC for less than 180 days, are increasingly selling at a loss.
When the price fell below $90,000, STH experienced unrealized net losses, which has historically been a catalyst for increased selling pressure.
Particularly vulnerable in this group are the "small fish" addresses, i.e., holders with less than 1 BTC, who often sell BTC to break even after long periods of unrealized losses during price rebounds.
The recent trend in the cost basis of BTC buyers further indicates a weakening of demand. In a strong market, the cost basis of those who bought BTC in the past 7 to 30 days is typically higher than those who bought 1 to 3 months ago, indicating a bullish market sentiment.
However, this pattern has reversed in the first quarter of 2025, with new market entrants hesitant to absorb the market supply. This shift coincided with BTC falling below $90,000, reflecting a transition from post-ATH momentum to a risk-averse environment.
Key Metrics Reflect a Cautious Market Sentiment
The Short-Term Holder Spent Output Profit Ratio (STH-SOPR) is a key metric for assessing the current selling pressure on BTC. It measures whether STH are selling at a profit or a loss.
Since BTC fell below $95,000, the 30-day moving average of STH-SOPR has remained below 1, indicating that most short-term investors are selling at a loss.
The metric dipped to 0.97 when BTC briefly reached $78,000, marking one of the most severe capitulation events in this cycle.
Persistent downward pressure has led to a more widespread cautious sentiment in the market, prompting short-term participants to continue selling. Historically, these conditions have signaled local seller exhaustion, with weaker investors exiting and stronger hands beginning to accumulate again.
Long-term investors typically monitor these conditions to identify potential re-entry opportunities, recognizing that deeply negative STH-SOPR readings can serve as a contrarian buy signal.
The report notes that as BTC experiences one of its most significant corrections in this cycle, the response of institutional investors will be crucial in determining the next phase of the market's trajectory.
If large institutional capital flows back in, it could provide the necessary support for a BTC price recovery. However, if deep-pocketed investors do not regain interest, the price of BTC may remain subdued, either consolidating within a range or declining further.
