Bitcoin’s (BTC) price is currently contingent on long-term holders or institutional demand to manage the recent selling pressure from short-term holders, according to the latest analysis.
The decline from Bitcoin’s peak of $109,590 on January 20 has heightened worries about the ability of institutional investors to uphold market momentum. The recent drop below $77,000 represents a 29.7% correction from its peak, making it the second most significant pullback of the current bull market.
Historically, 30% corrections often signal a market recovery, but current evidence suggests that “deeper-pocketed investors” have not yet fully mitigated the sell-side pressures.
Institutional flows and market stability
The rise of institutional participation, largely driven by spot Bitcoin exchange-traded funds (ETFs) and corporate acquisitions, has been essential in limiting the extent of pullbacks during this market phase.
Previous corrections tended to fall between 18% and 22%, indicating a trend toward shallower declines.
In contrast, the current 29.7% drop suggests that institutional backing may be weakening. Analysis points to significant ETF outflows, totaling $921.4 million over four of five trading days last week, as a contributing factor to this trend.
If institutional investors do not rekindle their buying interest, Bitcoin may endure a prolonged phase of price consolidation or further decline.
Increased selling pressure
Market data reveals that short-term holders (STHs), defined as wallets holding BTC for less than 180 days, are increasingly selling at a loss.
As the price fell below $90,000, STHs faced net unrealized losses, a situation that has historically prompted heightened sell pressure.
A particularly exposed segment within this group comprises “shrimp” addresses — individuals holding less than 1 BTC — who often sell during brief price recoveries after experiencing prolonged unrealized losses.
The cost basis trends of recent Bitcoin purchasers further highlight shrinking demand. Under favorable market conditions, the cost basis for those who bought BTC in the past week to month usually surpasses that of buyers from one to three months earlier, signaling optimistic sentiment.
However, this trend reversed in early 2025, as new market entrants have been hesitant to soak up supply. This shift aligned with Bitcoin’s descent below $90,000, showcasing a move from post-all-time high enthusiasm to a more cautious atmosphere.
Key indicators reveal market hesitance
The Short-Term Holder Spent Output Profit Ratio (STH-SOPR) serves as an essential measurement for assessing Bitcoin’s current selling pressure. It evaluates whether STHs are parting with their holdings at a profit or a loss.
Since Bitcoin dipped below $95,000, the 30-day moving average of STH-SOPR has consistently stayed below one, indicating that the majority of short-term investors are incurring losses when selling.
The metric, which uses one as a neutral point, fell to 0.97 when BTC briefly touched $78,000, marking one of the most severe capitulation events in this cycle.
Ongoing downward pressure has led to increased caution in the market, pushing short-term participants to continue selling. Historically, such circumstances have often preceded episodes of local seller exhaustion, where weaker hands exit the market, allowing stronger hands to begin accumulating once more.
Long-term investors typically track these conditions for potential re-entry opportunities, recognizing that significantly negative STH-SOPR readings can be viewed as contrarian buy signals.
As Bitcoin navigates one of its most substantial retracements this cycle, responses from institutional investors will be pivotal in shaping the market’s next movement.
If institutional capital returns with substantial volume, it could offer the vital support needed for a recovery. Conversely, in the absence of renewed interest from affluent investors, Bitcoin’s price could continue to be subdued, characterized by ongoing range-bound trading or further declines.