The Bitcoin market now resembles a rope being pulled in opposite directions by two strongmen; on one side is the harsh reality of tightening macro liquidity, and on the other side is a firm belief in long-term value fundamentals.
Bitcoin plummeted from its historical high of $126,000 to $89,000 in just over a month, with a decline of more than 25% causing the 'Cryptocurrency Fear and Greed Index' to slide directly into the fear zone.
Market sentiment has undergone a complete shift from greed to panic. However, upon delving deeper into the data, I found that this plunge, on the surface, appears to be a panic sell-off, but behind it is a silent 'exchange of chips'.
01 Long-short game, who is leading the market?
The most distinctive feature of the current Bitcoin market is the extreme divergence of long and short forces. The bear camp is mainly composed of three types of players: long-term holders, institutional funds, and high-leverage speculators.
Long-term holders (HODLers) were originally the 'stabilizers' of the market, but they have now become a significant source of selling pressure. In the past 30 days, long-term holders have sold over 320,000 Bitcoins, with some statistics even reaching 810,000, setting a new annual selling scale high.
These veteran players have a very low cost basis, and even cashing out at $89,000 can yield considerable profits.
Institutional funds are also withdrawing. The US spot Bitcoin ETF has seen net outflows for several consecutive days, with a massive total withdrawal scale. Even Standard Chartered, which has always been optimistic about Bitcoin, has lowered its price forecast, cutting the end-of-2025 target from $200,000 to $100,000.
The liquidations of high-leverage speculators further amplified the decline. When prices fell below key support levels, the concentrated liquidation trigger mechanisms were activated, forming a 'down—liquidation—further down' death spiral.
The bull camp is not entirely inactive either. Institutional capital is seizing the opportunity to buy the dip; when Bitcoin falls to the $95,000 range, the frequency of large transactions over 50 coins has significantly increased.
Some retail investors are choosing to enter the market against the trend, with the number of new accounts opened on exchanges increasing after the price fell below $100,000. More importantly, the Bitcoin reserves on exchanges have dropped to multi-year lows, indicating limited potential selling pressure.
02 Dual squeeze of technical and macro aspects
From a technical analysis perspective, Bitcoin is currently in an extremely sensitive position.
A clear bearish flag pattern has formed on the daily chart. If the daily closing price effectively falls below the $90,000 mark, it may open up downward space towards $67,000 to $68,000. However, the 'three candles down' pattern on the weekly chart is also worth noting, as it usually indicates the final release of selling pressure and the starting point of a trend reversal.
The macro environment has made things even worse for Bitcoin. The recent 'hawkish rate cut' by the Federal Reserve left the market disappointed—though rates were cut by 25 basis points, the dot plot suggests that future rate cuts will slow significantly.
This approach of 'giving a candy while warning that there isn't much candy left' has instead reinforced concerns that 'high interest rates will persist longer.'
In the context of global tightening liquidity, Bitcoin, as a non-yielding asset, is indeed losing its appeal. It has retreated from being ‘digital gold’ to a ‘risk sentiment thermometer,’ with a correlation of up to 80% with the S&P 500 index.
03 The secrets revealed by on-chain data
If you only focus on price fluctuations, you might miss the most important signal—the on-chain data is telling a different story.
This seemingly panic-driven decline is essentially a continuous, slow 'great handover.' Early believers—those whales who entered when Bitcoin's price was still low—are systematically and gradually transferring their chips to new institutional investors and ETF buyers.
This structural change brings a direct consequence: the average cost basis of Bitcoin is continuously rising. The holder structure of the market is shifting from a few ultra-low-cost whales to a broader group of investors with higher cost bases.
In the long run, this may be a sign of the market maturing.
On-chain data also shows that despite the price drop, the fundamentals of Bitcoin have not deteriorated completely. The Bitcoin reserves on exchanges have fallen to a historical low of 1.8 million coins, indicating that long-term holders are removing chips from the circulating market, supporting the narrative of Bitcoin's scarcity.
04 Leverage retreat, market fundamentals healthier
One positive sign in the current market is the decline in leverage. The Z-Score calculated from open interest and funding rates has dropped into negative territory, indicating that the market is actively deleveraging.
This means that this wave of correction was not triggered by forced liquidations but rather the market applying the brakes itself. Such a decline is actually healthy; it clears easy-to-liquidate positions, making it less likely to trigger a chain liquidation later.
In the past 24 hours, the total amount of liquidations across the network exceeded $300 million, with the number of liquidated individuals reaching 114,600. Although this brutal double kill of longs and shorts is tragic, it has objectively helped to clear high-leverage positions, laying a foundation for the future healthy development of the market.
05 My view: Patience is more important than confidence
As a veteran who has experienced multiple bull and bear cycles, I believe the current market is in a game between 'short-term pain' and 'long-term value.' Who will win, the bulls or the bears? The question itself may be misleading.
In the short term, the bears do have the upper hand. The macro environment is unfavorable, the technical outlook is bearish, and funds are flowing out continuously, none of which supports an immediate significant rebound.
However, from a medium to long-term perspective, the logic of the bulls remains valid. The Federal Reserve's rate cut cycle is only delayed, not canceled; the regulatory framework is gradually becoming clearer, and Bitcoin's scarcity is exacerbated by the halving mechanism. JPMorgan, after adjusting for volatility compared to gold, believes that Bitcoin's theoretical price should be around $170,000.
The key support currently lies in the $86,000-$85,000 range. If it fails to hold, it may test $84,600 or even lower. The upper resistance area of $94,000-$96,000 needs to be broken to confirm the return of the bullish trend.
For ordinary investors, my advice is: avoid high leverage, adopt a strategy of building positions in batches, and keep a long-term perspective. The market always swings between fear and greed, and true value often quietly establishes itself during the market's most panicked moments.
When market sentiment slides into extreme fear, it is also the time we should remain the most rational. Bitcoin is undergoing a challenging transition from a 'high-leverage speculative asset' to an 'institutional allocation asset,' a process that inevitably comes with growing pains.
The true winners are not those who guess the direction correctly in the long-short game, but those who can remain rational amid market panic and see long-term value in uncertainty. The underlying value proposition of Bitcoin has not changed; only the short-term market sentiment and liquidity have shifted, creating opportunities for patient investors.
Follow Ake to learn more first-hand information and knowledge about the cryptocurrency market, becoming your guide in the crypto world. Learning is your greatest wealth!
