Short-Term Bitcoin Holders Are Deep Underwater While Old Hands Take Profits: What This Really Says About the Cycle

Bitcoin’s price slide in recent weeks has produced a familiar set of headlines about liquidations, ETF outflows and macro worries. Beneath the surface, however, on-chain data is telling a more nuanced story. Almost the entire cohort of short-term investors is now sitting on unrealised losses, while some of the longest-standing holders are finally cashing out a portion of coins accumulated over many years. Instead of signalling that faith in Bitcoin is broken, this combination looks like a classic late-cycle redistribution of risk from weak hands to a more diversified base.

In this piece, we unpack that dynamic using the latest on-chain data and place it in the context of previous cycles. Rather than simply repeating that short-term holders are hurting and long-term holders are selling, we ask three deeper questions:

• What exactly does it mean when 2.8 million BTC held by short-term buyers are underwater, and why is the comparison to the FTX bottom so important?
• Why are long-term holders reducing their balances by hundreds of thousands of coins without signalling a loss of conviction?
• How should traders and allocators interpret this redistribution: as a topping pattern, a prelude to a deeper bear market, or the painful reset that often precedes the next leg higher?

Answering those questions requires understanding who short-term and long-term holders really are, how their cost bases differ and why their incentives naturally diverge at this stage of the cycle.

1. Short-term vs long-term holders: more than a time label

Analysts often talk about short-term and long-term holders as if they were personality types. In reality, they are statistical cohorts defined by the age of the coins they control. Glassnode and other data providers draw the line at roughly 155 days: coins that have not moved for longer than that threshold are attributed to long-term holders, while coins spent in the last 155 days are treated as short-term supply.

That threshold is not arbitrary. Historically, coins that survive beyond about five months without being spent are much less likely to be moved in response to daily volatility. They migrate into deep cold storage, multi-signature vaults and other arrangements associated with long-horizon conviction. Coins younger than that tend to belong to traders, late entrants or highly active participants whose behaviour is much more sensitive to current price action.

Crucially, the same individual or institution can move between cohorts over time. A hedge fund that bought Bitcoin six weeks ago is part of the short-term group today; if it holds those coins through another four or five months, they will graduate into the long-term bucket without the underlying owner changing. The cohorts therefore represent behaviour at the level of the network, not fixed identities.

When we say that short-term holders are suffering and long-term holders are realising profits, what we really mean is that coins acquired near the top are deeply in the red, while a meaningful slice of the old base is finally being spent into this new demand.

2. A sea of red for recent buyers: 2.8 million BTC underwater

Recent on-chain readings show that roughly 2.8 million Bitcoin held by short-term holders are currently at an unrealised loss. In practice, that means nearly all coins acquired in the last five months were bought at prices above where the market is now trading. It is the largest stock of underwater short-term supply since November 2022, when the FTX collapse drove Bitcoin briefly into the 15,000 dollar region.

The parallels to that episode are instructive. In late 2022, the network reached a point where almost every coin bought after the Luna and Three Arrows blow-ups was in the red. Sentiment was exhausted, headlines were uniformly negative and many traders capitulated, locking in losses. At the same time, long-term holders, who had survived multiple cycles, either held their ground or quietly accumulated more. That asymmetry between new pain and old resilience was one of the markers that the bear market was nearing its exhaustion phase.

Today’s configuration shares some of that flavour but with important differences:

• The absolute price level is much higher. Instead of 15,000 dollars, the market is correcting from an all-time high above 120,000 dollars into the 90,000 range and below. The percentage drawdown is significant but still in the typical 20 to 30 percent corridor seen in bull-market corrections.
• The magnitude of short-term pain is comparable. Once again, nearly every incremental buyer since mid-year has a higher cost basis than spot. This tells us that the marginal participant in this cohort is under pressure, even if the long-term trajectory remains intact.
• The financial plumbing is more developed. A large fraction of the coins purchased by newer entrants sit inside ETF wrappers or regulated custody structures rather than on offshore exchanges. That shapes how and when they can exit.

Functionally, the result is a market where recent entrants have little room for error. Many of them chased price into six-figure territory, influenced by narratives about supply shocks, institutional FOMO and nation-state adoption. As the market retraces, those positions turn red at the same time as funding dries up and social media confidence evaporates. That is precisely the environment in which capitulation clusters form: not necessarily through dramatic single-day crashes, but via grinding sell pressure from participants who cannot stomach extended drawdowns.

3. Old coins moving at last: long-term holders sell 450,000 BTC

While short-term holders sit on paper losses, long-term holders tell a different story. Since early July, the supply attributed to this cohort has fallen from around 14.76 million BTC to roughly 14.30 million BTC, a net reduction of about 452,000 coins. In other words, hundreds of thousands of coins that had not moved for at least five months, and in many cases for years, have finally been spent in the last part of 2025.

At first glance, that sounds ominous. In earlier cycles, spikes in long-term holder distribution have occasionally preceded deeper bear markets, as old hands sold into euphoric peaks. Yet context matters. Several details about the current wave of spending suggest that it is driven less by a loss of faith in Bitcoin and more by pragmatic portfolio management and lifestyle considerations.

First, the liquidation window is unusually attractive. With price having punched through the symbolic 100,000 dollar level and ETFs providing deep, regulated liquidity, long-term holders face the most convenient exit conditions in Bitcoin’s history. They can sell into vehicles that trade on major stock exchanges, receive fiat or collateral in a familiar legal framework and do so without worrying about exchange solvency or off-ramp bottlenecks.

Second, commentary from long-time participants points to motivation beyond simple market timing. Many early buyers who accumulated Bitcoin lower down the curve are facing life-changing multiples on their original cost base. After years of holding through 70, 80 and 90 percent drawdowns, some are choosing to derisk part of their position to fund real-world goals: property purchases, business ventures, philanthropic projects or simply the desire to lock in financial independence. From that perspective, selling a slice of holdings near psychological milestones like 100,000 dollars is rational, even if they still believe in the asset’s long-term upside.

Third, despite this distribution, long-term holders still control the majority of the supply. Even after the recent selling, more than 14.3 million coins sit in the long-term bucket, and ETF holdings and corporate treasuries hold another meaningful chunk. That means the free float available to speculative traders is historically tight. Structural illiquidity is part of why relatively modest flows can move price so aggressively in both directions.

4. When short-term losses and long-term profits collide

Putting these two pictures together yields a subtle but powerful insight: we are in a phase where

• Recent buyers are trapped above price, nursing losses and increasingly sensitive to any further downside; while
• Veteran holders are finally feeding coins into the market, not in panic, but to diversify or monetise gains in a highly liquid environment.

That mix has several practical implications for how the next part of the cycle could unfold.

1. Volatility clusters around the short-term holder cost base. Because nearly all coins acquired since mid-year now sit above spot, any attempt by price to rally back toward those levels will run into a wall of potential supply. Some short-term holders will take the chance to exit at break-even, others will de-risk partially, and still others will double down. The size of that 2.8 million BTC overhang means moves into the 100,000 dollar area are likely to be choppy, with both sharp squeezes and equally sharp rejections.

2. Distribution from long-term holders is finite. Unlike short-term cohorts, which can expand rapidly during a mania, the pool of coins controlled by old hands is inherently limited. They cannot sell more than they own. The recent 450,000 BTC reduction is large in absolute terms but still a minority of the long-term base. If much of this spending was opportunistic lifestyle cashing-out rather than wholesale exit, the pressure from this side of the market may ease as those goals are met.

3. ETF behaviour introduces a stabilising force. Interestingly, the on-chain data suggests that spot ETF holdings measured in BTC terms have only dipped modestly from their highs, even as price has corrected sharply. That means the instruments many feared would amplify volatility are, at least for now, acting as relatively sticky hands compared with short-term traders on offshore exchanges. If that divergence persists, it could soften the impact of short-term capitulation waves.

5. Comparing to previous cycles: echo of 2017 and 2021, not a copy

Every Bitcoin cycle features a phase where new money buys old coins at a premium. In the 2017 blow-off top, long-term holders sold aggressively into parabolic retail inflows, and the eventual unwind flushed latecomers with 70 to 80 percent drawdowns. In 2021, the pattern was more complex, with two peaks separated by a mid-cycle reset, but the principle remained: coins flowed from patient hands into the exuberance of new entrants, and then back into accumulation mode once the froth cleared.

The current arrangement rhymes with those episodes but is not identical.

• The presence of ETFs and corporate treasuries creates new pathways for long-term holders to reduce risk without leaving the ecosystem entirely. Some old coins are being swapped for professionally managed products that still track Bitcoin’s performance.
• The regulatory and macro backdrop is more mature. Governments, central banks and large financial institutions are now part of the audience. That tends to lengthen cycle amplitudes and complicate simple boom-and-bust analogies.
• The average cost basis of long-term holders is much lower, and their conviction has been stress-tested across several historic drawdowns. That may make them less likely to dump into weakness and more likely to resume accumulation once short-term excesses are cleared.

In that sense, the current data does not neatly map to either a straightforward market top or an obvious generational bottom. Instead, it looks like an intermediate regime where the market is digesting the consequences of rapid price appreciation, new institutional plumbing and shifting macro expectations.

6. Scenario analysis: top, trap or reset?

Faced with headlines about record short-term losses and heavy long-term distribution, investors naturally want a binary verdict: is this the end of the bull market, or a painful but healthy reset? On-chain data cannot provide certainty, but it can help map plausible scenarios.

Scenario 1: classic cycle top and transition into bear market

In this scenario, the all-time high above 120,000 dollars marked the cycle peak. The heavy selling from long-term holders is interpreted as an exit into euphoria, and the vulnerability of short-term holders becomes fuel for a prolonged downtrend. Price fails to reclaim six-figure levels on any bounce, grinding lower over months as underwater cohorts capitulate and liquidity migrates elsewhere.

Support for this view comes from the scale of the LTH distribution and the macro headwinds facing risk assets more broadly. If inflation proves sticky, real yields rise and regulatory burdens increase, Bitcoin could struggle to attract incremental demand at the pace required to absorb both old and new supply.

Scenario 2: deep correction within an ongoing structural bull

Here, the current drawdown is treated as a severe but ultimately contained correction within a longer secular uptrend. The 2.8 million BTC in short-term losses represent a powerful source of future fuel: once their coins capitulate to stronger hands, the market can climb a wall of worry with less overhead resistance. Long-term holders who sold 450,000 coins are seen as opportunistic rebalancers rather than defectors; many may re-enter later through ETFs or direct accumulation.

Under this lens, the period of maximum short-term pain often corresponds to the zone of best long-term opportunity. Historically, when short-term cohorts have been almost entirely underwater, subsequent one to two year returns have been attractive for patient buyers. What matters is not guessing the exact bottom but recognising that price is closer to the lower end of a cycle-wide range than to its upper extremes.

Scenario 3: extended sideways regime

A third possibility is less dramatic and more frustrating: the market enters a wide sideways band for an extended period. Price oscillates between, for example, the high-70,000s and low-110,000s, repeatedly testing the patience of both bulls and bears. Short-term holders churn in and out as they try to trade the range, while long-term holders gradually adapt to the presence of ETFs, new regulatory frameworks and evolving narratives.

This kind of regime is difficult to trade but can be constructive for the asset’s maturity. It allows derivatives markets to stabilise, regulatory dust to settle and applications to catch up with speculative valuations. From an on-chain perspective, you would expect to see short-term supply slowly re-accumulated at lower cost bases, even as long-term supply stabilises after the current distribution wave.

7. Practical takeaways for different types of investors

While no single framework fits everyone, the current on-chain picture does suggest some broad guidelines.

For short-term traders: Recognise that you are part of the cohort under the most stress. When almost every coin bought in the last 150 days is at a loss, crowded attempts to escape at break-even can create sharp rejection wicks near previous support zones. Position sizing, leverage discipline and patience around entries become critical. Blindly following social-media narratives about whales or ETF flows without checking on-chain context is particularly dangerous in this environment.

For long-term holders who have not sold: The recent behaviour of your peers does not automatically mean you should change course. Some old hands are selling for idiosyncratic reasons: life goals, diversified portfolios, or tax planning. If your thesis remains intact and your allocation matches your risk tolerance, there is no obligation to mimic their moves. At the same time, the data is a reminder that it is legitimate to realise gains after dramatic appreciation; diamond hands do not have to mean never touching the sell button.

For institutional allocators and funds: The divergence between stressed short-term cohorts and relatively stable ETF balances is worth watching. It suggests that the investor base accessed through regulated products behaves differently from the hyperactive users of offshore derivatives. Portfolio construction that blends spot, ETF and derivatives exposure can use that difference to manage volatility. On-chain cohort data also provides a valuable overlay for timing rebalancing decisions, particularly around extreme readings like those now visible in short-term unrealised loss metrics.

Conclusion: a market reshuffled, not abandoned

The headline facts are stark: roughly 2.8 million Bitcoin held by short-term buyers are underwater, and long-term holders have spent more than 450,000 coins since mid-year, the largest such distribution since the early stages of the last cycle. It would be easy to read that as a verdict against Bitcoin’s long-term story.

A closer look suggests something more subtle. Short-term cohorts are experiencing the painful side of volatility that earlier generations of holders already lived through. Long-term holders, far from fleeing en masse, are using an unusually favourable window of price and liquidity to convert part of their paper wealth into real-world outcomes. ETF balances remain near their highs in BTC terms, signalling that a large portion of institutional capital is not rushing for the exit.

In other words, the network is not collapsing; it is re-pricing. Risk is moving from those who arrived late and overexposed to those with more robust balance sheets and longer horizons. For a professional news and analysis platform, the task is not to declare an easy top or bottom, but to make that redistribution visible and intelligible. Whether Bitcoin’s next act is a renewed climb, a grinding range or a deeper winter, understanding who holds what, at what cost and for how long remains one of the most powerful lenses we have on the health of the system.

This article is for informational and educational purposes only and does not constitute investment, trading, legal or tax advice. Digital assets are highly volatile and may be unsuitable for many investors. Always conduct your own research and consider consulting a qualified professional before making financial decisions.