Bitcoin has been on a downward path since October, with its price slipping below $85,000. While market observers often assume these declines are driven by investors selling their holdings, data tells a different story. Recent pullbacks are mainly linked to short positions opened using stablecoins, with broader market dynamics helping to amplify the effect.
Sweep, co-founder of GlydeGG, explained that stablecoin-denominated leveraged shorts are the main force behind the recent dips. When these positions enter the market, market makers must respond by selling Bitcoin to manage exposure and maintain neutrality. This operational selling is not reflective of negative sentiment but is necessary to balance positions.
Consequently, prices can decline without sparking widespread alarm, rushed selling, or spot sales from long-term holders. The U.S. dollar itself plays a role in this cycle, as it moves through the global system, acting as leverage and exerting pressure on the market. Traders respond to this pressure by adjusting their positions through hedging, which affects spot Bitcoin prices and maintains the ongoing cycle.
Meanwhile, sell-offs remain subdued because most retail investors have already exited, leaving the market to operate within a system measured against a weakening currency. This setup contributes to rising volatility even when overall investor conviction stays steady, highlighting the market’s sensitivity to the dollar’s influence. This is less a traditional bear market and more a rebalancing of liquidity pools, allowing larger players to acquire Bitcoin at lower prices without directly holding it.
This surge in supply was fueled by long-term holder sales, over-the-counter transactions, and ETF absorption, representing one of the largest increases in available Bitcoin supply in the network’s history. According to on-chain metrics provided by CryptoQuant, long-term holders have been distributing Bitcoin at rates not seen in over five years, marking one of the most active periods of holder activity in recent history. Alongside this, the market is experiencing downward pressure that currently outweighs demand, intensified by negative ETF flows and reduced participation from retail investors.
However, K33Research suggests that the current Bitcoin distribution phase may be ending, with long-term holders expected to ease their releases sometime in the first half of next year. This could create an opportunity for fresh buying as institutional adjustments help stabilize supply. Markets remain sensitive, but structurally, this looks like a late cycle redistribution rather than panic selling.
According to CryptoQuant, significant Bitcoin inflows have occurred on Binance as the price fell below $85,000. At the same time, Bitcoin has moved back toward the average cost basis of U.S. spot ETFs, placing many ETF investors close to their initial investment value. According to Glassnode, this zone is especially important, as future movements will depend on whether fresh buying enters the market or selling pressure increases while holders review their positions.
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