Who is selling Bitcoin, will it rise or fall next?

After experiencing sharp falls and consolidation, the crypto assets market seems to be shrouded in a fog. Bitcoin prices hover below key psychological price levels, and market sentiment is like a startled bird, filled with the greatest doubt among investors: amidst the continued influx of funds into exchange-traded funds (ETFs), who exactly is selling Bitcoin? Behind this fierce debate between bulls and bears, does it signify the continuation of a bull run, or the beginning of a deep bear market?

To unravel this mystery, we must delve into the intricacies of the market, piecing together a complete picture from on-chain data, macroeconomics, and institutional viewpoints.

A “big handover” is currently taking place.

As the market generally focuses on the buying pressure of ETFs, a core question emerges: who is supplying this continuous selling pressure? According to the views of Chris Kuiper, Vice President of Digital Assets Research at Fidelity, and several on-chain analysis firms, the answer points directly to a group: Long-Term Holders and early whales.

Fidelity's Kuiper pointed out that this is not a panic selling, but rather a “continuous, slow bleed.” The Glassnode data he cited shows that the indicator of “the percentage of Bitcoin supply inactive for more than a year” typically drops sharply during past bull runs, indicating that long-term players are taking profits at the peaks. However, in this cycle, the decline curve of this indicator has been unusually gentle. This suggests that long-term holders are systematically and gradually transferring their chips out.

The market vividly describes this phenomenon as a “great handover.” Early believers, those whales who entered when Bitcoin prices were still low, are gradually cashing out their massive profits. For example, the associated wallet of early whale Owen Gunden recently transferred over $1 billion worth of Bitcoin to the exchange.

The other party in this turnover consists of newly entering institutional investors and ETF buyers. This explains why there is a visible strong buying interest in the market, yet the price has consistently struggled to achieve a decisive breakthrough. Old chips with very low costs are being replaced by new chips with higher costs.

This structural change has brought about a direct consequence: the average cost basis of Bitcoin (measured by the MVRV indicator) is continuously rising. This means that the structure of market holders is shifting from a small number of ultra-low-cost whales to a broader group of investors with a higher cost basis. In the long run, this may be a sign of the market maturing, but in the short term, it also sows seeds of concern – if these new entrants face losses, their willingness to sell may be stronger, thereby exacerbating the market's vulnerability.

Concerns of the bears

The sell-off by long-term holders is not unfounded; there is a strong wave of pessimism in the market, mainly stemming from the following aspects:

Technical indicators are flashing red: According to analysis by 10x Research, the Bitcoin price has fallen below the 21-week Exponential Moving Average (EMA), which is historically seen as a key signal for entering a “mini bear market.” At the same time, the realized price of short-term holders (average buying cost) is above the current market price, meaning that investors who entered recently are generally in a loss position, significantly increasing the risk of a “surrender-style dumping” in the market. Analysts have set a key bullish/bearish dividing line: as long as the price is below $113,000, the market faces significant downside risk.

Macroeconomic and political uncertainties: liquidity is central to determining the prices of risk assets. Recent developments in the American political scene have added variables to the market. The Democratic Party's victory in local elections may indicate stricter regulatory policies for Crypto Assets. Furthermore, although the market generally expects the Federal Reserve to cut interest rates in December, hawkish remarks from several officials make this outlook far from certain. The dual uncertainty of politics and monetary policy looms over the market like two dark clouds.

The disappearance of the “double cycle resonance”: Renowned analyst Willy Woo has put forward a profound viewpoint: the overlapping effect of the “halving cycle” that has historically driven Bitcoin bull runs and the “global liquidity cycle” is fading. As the cycles become misaligned, Bitcoin loses its natural accelerators, and its trajectory will rely more on the macroeconomy itself. Even more alarming is that Bitcoin has never experienced a complete and genuine economic recession (like the crises of 2001 or 2008), and its performance during a recession is entirely unknown.

Based on these concerns, JPMorgan has a positive outlook for the medium term but also points out the market's “pain threshold.” They estimate that the current production cost of Bitcoin (mainly the miners' electricity and operating costs) is about $94,000. This price has historically served as a solid bottom for the market multiple times, because once the price falls below this level, miners will face pressure to incur losses and reduce selling, thus forming support.

The confidence of the bulls

Despite the overcast skies, on the other side of the market, the bulls still hold their ground, their confidence stemming from optimistic expectations for the future:

Liquidity is about to see a turning point: Real Vision CEO Raoul Pal believes that the current liquidity tightening is the “darkness before the dawn.” With the end of the U.S. government shutdown, the Treasury will begin massive spending, injecting hundreds of billions of dollars of liquidity into the market. BitMEX founder Arthur Hayes also proposed the idea of “Stealth QE,” believing that the massive debt issuance demand from the U.S. government will ultimately force the Fed to expand its balance sheet, thereby releasing dollar liquidity and fueling the rise of Bitcoin.

Gradual Clarification of the Regulatory Environment: One of the biggest positives for the crypto market is the certainty of regulation. The rapidly advancing CLARITY Act aims to transfer the spot regulatory authority of mainstream digital commodities like Bitcoin to the Commodity Futures Trading Commission (CFTC), which will greatly reduce the regulatory ambiguity of the Securities and Exchange Commission (SEC), paving the way for banks and brokerages to enter the market on a large scale. The bill has bipartisan support and is expected to be legislated by the end of 2025, which is undoubtedly a shot in the arm for the market.

Solid value anchor points and long-term goals: While pointing out a cost floor of $94,000, JPMorgan also reaffirmed their mid-term optimistic forecast for Bitcoin. Based on the volatility-adjusted comparison with gold, they believe the theoretical price of Bitcoin should be around $170,000. This target price implies that there is still significant upside potential for Bitcoin from current levels.

Extension rather than termination of the cycle: In response to the “cycle invalidity theory”, Raoul Pal proposed the hypothesis of a “five-year cycle”. He believes that the peak of this bull run may be delayed until the second quarter of 2026. If this judgment holds, then the current consolidation and pullback actually provide an excellent positioning opportunity for long-term investors.

Uncertainty is the greatest certainty.

Overall, the current Bitcoin market is at a complex and critical crossroads.

On one hand, a profound “Great Rotation” is underway, with early investors' profit-taking creating persistent selling pressure, while technical indicators and the macro environment are also filled with challenges, making the market appear precarious.

On the other hand, the future liquidity expectations, gradually clearer regulatory framework, as well as structural support and long-term valuation from top investment banks, have injected strong bullish confidence into the market.

The core of this long and short standoff is the game between short-term pressure and long-term potential. The past simple rotation model of “Bitcoin skyrocketing and altcoins following” may have become ineffective, as the market has become more mature and complex. In the short term, the market's direction will depend on the actual release speed of liquidity and the outcome of political maneuvering; in the medium term, the implementation of regulatory legislation will be a key catalyst; and in the long term, whether Bitcoin can prove its value amid a potential economic recession will be the ultimate test that determines its final status.

For investors, the only certainty is that uncertainty itself has become the greatest certainty in the current market. Understanding the trading time frame you are in and distinguishing the logic behind different arguments may be the best compass for navigating through this fog.

#Encryption market correction