Bitcoin Updates: The Looming Threat of Capitulation—Is Bitcoin Destined to Relive Its Past?

Intense Capitulation Among Bitcoin Short-Term Holders

Recent data reveals that individuals who have held Bitcoin for a short period are undergoing one of the most severe sell-off phases seen in recent years. Over a two-week period, these investors have faced losses ranging from 20% to 25%. This rapid decline, which coincided with Bitcoin’s sharp 22% drop in November to below $85,000, appears to be driven more by panic selling than by calculated decisions. The situation is further complicated by already low market liquidity and a cautious macroeconomic environment.

The Spent Output Profit Ratio (SOPR) for short-term holders has fallen to 0.94—a level that typically signals widespread capitulation among newer market participants. Historically, such readings have preceded periods of stabilization and eventual recovery, although analysts caution that the current market remains fragile.

Shifting Dynamics in the Crypto Market

This wave of capitulation is occurring alongside significant changes in the broader cryptocurrency landscape. In Brazil, for example, stablecoins now account for 90% of crypto trading activity, overtaking Bitcoin as the dominant asset. This shift comes as regulators implement stricter reporting requirements. Globally, central banks have enacted 316 rate cuts over the past two years—the most aggressive monetary easing since the 2008-2010 financial crisis. Despite this, Bitcoin has not responded as expected to increased liquidity, raising questions about its current relationship with monetary policy. In contrast, gold has outperformed Bitcoin by 58% since the introduction of spot Bitcoin ETFs, as institutional investors continue to favor gold’s established market infrastructure.

Signs of Cautious Optimism

There are some encouraging signs for Bitcoin’s future. Open interest in derivatives has dropped sharply, indicating that many leveraged long positions have been liquidated. Additionally, spot Bitcoin ETFs have recently reversed a four-week trend of outflows, attracting $70 million in net inflows over the past week. However, total outflows since January 2024 still amount to $4.35 billion. Some analysts, such as André Dragosch from Bitwise Europe, believe that Bitcoin’s current price does not fully reflect improving macroeconomic conditions and suggest that a relief rally toward $100,000–$110,000 could occur if selling pressure subsides.

Challenges Ahead for Bitcoin

Despite these positive developments, significant risks remain. Diminished liquidity in both cryptocurrency and traditional financial markets has heightened Bitcoin’s volatility, with each wave of selling causing pronounced price drops. Ongoing delays in U.S. Treasury spending and global liquidity constraints continue to weigh on risk assets. Bitcoin’s leveraged nature makes it especially vulnerable to these shocks. While some market observers anticipate a potential rally after a 60-70 day lag, others warn of possible financial turmoil in 2026, citing concerns such as U.S. debt issuance, risks associated with the yen carry trade, and China’s credit market leverage.

Key Levels and Investor Sentiment

Currently, the market is watching to see if Bitcoin can reclaim the $88,000 mark, which would signal a possible local bottom. Stabilizing SOPR readings and declining funding rates suggest that selling pressure may be easing. However, with short-term holders still incurring significant losses and broader economic uncertainties unresolved, a sustained recovery is likely to require both patience and resilience from investors.