Bitcoin (BTC) is currently undergoing an intense phase of panic selling, particularly among short-term holders. These investors are offloading their assets at notable losses, as indicated by recent on-chain metrics. Analysts suggest that this phenomenon could set the stage for a substantial market reversal as weaker hands exit the market, allowing long-term investors to acquire assets.

Extreme Strain for Short-Term Holders

New insights from XWIN Research reveal that Bitcoin’s Short-Term Holder Spent Output Profit Ratio (STH-SOPR) has dipped to approximately 0.97, remaining below the crucial mark of 1.0 for several weeks. This indicates that recent buyers of BTC are selling at an average loss, leading to a “capitulation band” that has historically appeared at major cycle bottoms.

The Short-Term Holder MVRV ratio has also significantly declined, indicating that this group of investors is currently experiencing one of the weakest profitability phases recorded. XWIN reports that over 65,000 BTC have been sent to exchanges at a loss, reflecting active selling driven by fear rather than mere speculation.

Additionally, a pseudonymous analyst known as Darkfost noted that although short-term holders are currently causing significant changes in daily flows, long-term holders are now contributing to true selling pressure. Their data on Spent Transaction Output (STXO) indicates that while short-term holder flows are high, they are becoming more balanced, contrasted by a spike in long-term holder STXO, a pattern often noted at market peaks or during intense stress events.

Capitulation Amid Retail Anxiety

In the market, Bitcoin is trading at around $91,000, having declined about 13% in the past week and nearly 18% over the last 30 days. This movement occurs within a range of approximately $90,000 to $94,000 in the last 24 hours and remains about 27% below its all-time high of over $126,000 recorded in October.

Furthermore, data indicates that smaller BTC wallets have sold off about 0.36% of their holdings within just five days, with similar trends also appearing in Ethereum (ETH) and XRP.

The Fear and Greed Index has recently dropped to a nine-month low, showcasing levels reminiscent of significant market panics in the past. However, some longer-term signals indicate potential recovery, with Bitcoin’s realized losses recently hitting around -16%, a zone historically associated with upcoming recoveries. Analysts are also noting record 30-day demand from long-term holders and new acquisitions from entities like El Salvador, which recently purchased over 1,000 BTC during the downturn.