Transcription
We've just witnessed the largest realized loss event by short-term holders in Bitcoin's entire history. So, in today's video, we're going to dive deep into the onchain data, looking at profits, losses, supply dynamics, why this capitulation selloff has been so severe, and where we might ultimately find a bottom. There's a lot to dive into here, so let's get straight into it.
Today, we're going to start by talking a lot about short-term holders versus long-term holders because their behavior is telling two completely different stories right now. So, just as a quick reminder for anyone new here, short-term holders are investors that have moved their coins within the last 155 days or less. Or in other words, they bought Bitcoin and then they sold it either at a profit or a loss within roughly the past 5 months. And that's why we call them short-term holders. And on the flip side, long-term holders are those who have held their coins for longer than 5 months. And we analyze these two groups separately because they almost always behave in dramatically different ways. And studying them side by side reveals a huge amount about market psychology and different behavioral patterns.
Now, the first metric we're going to jump into here is the short-term holder realized loss. And this simply shows us how many US dollars short-term holders are locking in as losses on any given day when they sell. And what we're seeing right now is the largest realized loss event by short-term holders in Bitcoin's entire history. We're talking about close to a billion dollars per day in short-term holder capitulation. That's bigger than the China mining ban selloff in 2021 and bigger than the FTX collapse in the depths of the 2022 bear. It's an absolute staggering level of pain being absorbed right now.
And we can confirm this when we look at the net realized profit and loss ratio, which now includes both profits and losses. So here, anything above zero means the short-term holder cohort is realizing net profit, and anything below zero means they're realizing net losses. And this current event is the deepest spike into realized loss territory we've ever seen. And remarkably, it's almost mirroring the size of the biggest profit-taking events in history. And that's surprising because psychologically profit-taking spikes are almost always larger than loss-taking spikes. People are far more eager to lock in gains than they are to realize a loss. Most investors would rather just grin and bear it and hold their bags rather than crystallize the pain. Yet, right now, we're seeing the exact opposite play out. Normally, when people are making money, they can't hit the sell button fast enough. But when they're down 20%, 30%, or 40%, most just freeze and hope it comes back. That's human nature, and it's why loss spikes are usually far smaller and more drawn out. Yet, here we are watching short-term holders rip the band-aid off at full speed, locking in bigger dollar losses per day than we've ever seen before. So, if we were ever to see a textbook definition of capitulation, this would be it.
So, are people choosing to also hold their bags despite the losses? Well, the answer is yes, and big time. There's currently over $70 billion in unrealized losses held by short-term holders across the market, which are essentially losses that only exist on paper because these holders haven't sold yet. And again, that's the highest dollar amount of short-term holder unrealized losses in Bitcoin's entire history, only just edging out the 2021 waterfall selloff.
Now, for those contrarian investors amongst you, which I guess we all try to be, all of this data looks incredibly bullish at first glance. We've just witnessed the largest realized and unrealized loss event for short-term holders ever. So, surely this has to be the bottom or just the ultimate buy the dip moment, right? Well, it might be to a degree, but we have to zoom out and look at the broader picture, too.
This next chart here shows the percentage of short-term holder supply that is currently in a loss. And right now, 90% of all short-term holder coins are underwater. And it was as high as 97% just a few days ago. And there are two very distinct historical patterns that show up on this short-term holder supply and loss chart. And right now, the market is sitting exactly at the crossroads where both are possible.
The first pattern, the one that's played out over and over again this cycle, is the mid-cycle shakeout. Every time we've pushed above the 80% to 90% short-term holder coins in loss, which were in August '23, August '24, and April '25, it has marked a local price low within days or weeks, followed by a steady grind higher as new demand stepped in. It's been almost mechanical this cycle, which is why a lot of people are pounding on the table saying that this is just another healthy reset. And so far, until proven otherwise, that pattern is still undefeated in this current bull run.
Now, the second pattern is the ugly one, the start of a real prolonged bear market. In 2014, 2018, and 2022, once this metric crossed roughly 85%, it did not bounce straight out. Instead, it camped in the 70% to 100% loss zone for months on end, sometimes for 10 to 14 months because new buyers simply refused to show up in size, and the only thing left to do was for the remaining weak hands to slowly bleed out. And the pain in this scenario becomes structural rather than temporary.
But when we overlay the same percentage supply and loss metric, but for the entire Bitcoin supply, so including long-term holders as well, the difference becomes crystal clear. In bull cycle corrections, the whole supply metric never gets above about 30% without it triggering an actual bear market. Whereas when in a true bear market, it grinds between 40% to 60% for about a year or sometimes more. And we're not at those levels yet, which is the one saving grace. But we are at about 35%. Which means that we're definitely in uncharted territory and we're right on the cusp of it turning into something pretty brutal. So if we keep leaking lower over the next few months and that broader metric starts creeping towards 40%, then it would be the confirmation that we flip from a healthy dip to a true extended bear.
Now, there's one idea floating around recently that I personally find quite compelling. We might be in a 2019-style environment right now. And for those that weren't around back then, here's what happened in a nutshell. Bitcoin recovered from the 2018 bear market bottom, rallied to a local top in the summer of 2019, and then entered a mini bear market that lasted several months before the final explosive leg higher in late 2020 into 2021, fueled by all the pandemic era liquidity. And I'm seeing a lot of macro analysts out there calling for 2026 to be a much more favorable year from a liquidity and macro perspective. And we know Bitcoin responds strongly to those forces. So the theory here is that we see a 2019-style mini bear market that lasts roughly 6 months instead of a full-blown 10 to 14 month cycle downturn, taking us to around March or April next year for a final bottom before another strong macro-driven rally into the second half of the year. Now, that's all just speculation, but it's interesting nonetheless.
So, let's put the guesses aside for a moment and look at why these sharp drawdowns are actually happening and how long they might continue for. Here we have the long-term holder realized profit chart, which is the total US dollar amount of profits realized by long-term holders on-chain. In bull markets, long-term holders tend to behave like the smart money. They sell gradually into strength and ease off during corrections. And you can see that they've almost perfectly timed the distribution at the three major tops we've had in this cycle so far.
But the really worrying part right now is that even deep into this downturn, long-term holders are still extracting massive profits, around $1.5 billion per day based on the most recent data. And that's a huge overhang. Every dollar they realize is fresh supply hitting bids and forcing prices lower, which in turn triggers more panic amongst the short-term holders. It's a self-reinforcing loop, and it's the primary reason the capitulation feels so relentless and why there's very real cause for concern. So for any durable bottom to form in the near term, this long-term holder profit taking has to slow down dramatically and eventually grind to a halt.
But the one genuinely encouraging sign, though, is that unrealized profit margins are collapsing back in lockstep with the price. The lower we go, the thinner those paper gains become, and the less financial incentive there is for these long-term holders to keep hitting the sell button. Motivation is drying up in real time, and there's only so much profit left to take before the math simply stops making sense for them. And that's the mechanism that has historically put a floor under these sell-offs, and it's already in motion.
But the single most important chart I'm watching right now to gauge whether the bleeding is finally starting to ease is the long-term holder 30-day net position change. And this metric tells us in real time whether long-term holders are net accumulating, shown in green, or net distributing, shown in red, over the past month. Green phases have historically been absolute gold. They repeatedly mark some of the best generational-style buying opportunities across every cycle. When these holders flip from sellers to buyers, it's usually game over for the bears. And red periods, on the other hand, mean distribution. And that can happen for two very different reasons. Either they're playing it smart and locking in gains near cycle or local tops, the diamond hands turning into smart money type of scenario. Or less commonly, but far more painfully, even some long-term holders lose their nerve and start capitulating alongside the crowd. They're still human. They're not robots. And when fear gets extreme enough, even the strongest hands can crack. But right now, we're deep in the red zone. Long-term holders are offloading roughly 600,000 BTC per month net. That's an enormous amount of sustained supply. And as long as it stays negative, it acts like a lead weight on the price. So until this indicator flips back to green or at the very least flattens near zero, the path of least resistance remains downward. It's really that simple. This is the one metric that has to turn before I'll start believing the worst of the selling pressure is truly behind us.
And finally, the last thing that desperately needs to calm down is the cascade of long liquidations we're seeing in the futures market. There are still huge numbers of people trying to catch this falling knife with extreme leverage, hoping to nail the exact bounce. And buying spot on dips is one thing, and I think that's perfectly fine and honestly pretty smart. But leveraging long on one of the clearest downtrends in a while is incredibly dangerous. What we really want to see is these long liquidations drying up completely and average leverage positioning flipping to net short. That would set the stage for a proper short squeeze and usually marks the local bottom in price pretty effectively.
But finally, before we wrap up, where do I think we actually bottom under the scenarios we've discussed? Well, I laid out my extreme bear case price targets last week, so I won't repeat those here. But in the more moderate 2019-style chop scenario heading into '26, I would expect us to oscillate around the true market mean price, which is the average acquisition cost of the entire Bitcoin supply, but excluding the very earliest coins like Satoshi's and the early miners. And that true market mean is sitting around $81,000 at the moment. So, if we do get some months of choppy, frustrating rangebound price action, that's the area I expect us to keep gravitating towards until the next leg higher finally kicks in. So, I'm not saying the low $80s would be the exact bottom, but in a period of chop at these levels, I'd expect price to roughly oscillate around this level, plus or minus, say, $10,000.
So, to wrap things up, what we've just lived through is hands down the heaviest short-term holder capitulation in Bitcoin's entire history. We're talking close to a billion dollars a day in realized losses, plus another $70 billion sitting in unrealized on paper. That's more pain than the China mining ban, more than FTX, more than anything we've ever seen from newer buyers. It's brutal, but it also means that an enormous amount of weak hands have already been shaken out. And at the same time, the real weight dragging price down right now isn't just short-term holder panic. It's long-term holders still extracting around $1.5 billion of profit every single day. And until that red bar on the net position change finally flips green, or at least flattens out, we've got this massive supply overhang acting like a lead weight on the market. And that's one thing that has to change before any bottom feels solid.
And finally, we're standing at a genuine fork in the road right now. We either get a 2019-style replay, which is 6 months of frustrating chop around the true market mean price, clearing the mess before the next macro-driven leg higher in '26. Or the broader supply and loss metric keeps climbing towards 40% and we'll likely slide into a prolonged 10 to 14 month bear market that grinds lower well into next year. And right now, the data still leans towards the shorter, cleaner scenario, but we're right on the edge, and the rest of Q4 will likely tell us which path we're actually on. The cycles always look the ugliest right when the weakest hands are finally gone and the strongest ones are about to start buying again. So, keep an eye on this data instead of the price. And remember, surviving the capitulation is how you earn the right to ride the next real bull run.
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