Market Capitulation and Short-Term Holder Behavior
Bitcoin (BTC) has experienced its most significant wave of capitulations since the FTX crash. After enduring several price drops, short-term wallets have begun to capitulate, absorbing previously unrealized losses. These short-term holders have been the primary drivers of the recent market capitulation, realizing the largest losses since 2022. The current market drawdown bears resemblance to the crash following the FTX collapse, although it has not involved the loss of major players or a sudden decline in liquidity.
Data from Glassnode indicates that long-term holders have maintained limited realized losses, having accumulated their holdings at significantly lower prices. The average realized price for BTC stands at $54,622, an all-time peak. In 2025, a substantial number of whales distributed their older holdings near price peaks. However, it was the short-term buyers who capitulated during the latest dip into the $80,000 range.
Potential Market Bottom Indicated by Capitulation
BTC has returned to a recent local high of $94,000, subsequently falling below $92,000 again. While the market is showing signs of returning momentum, it remains shaky in the short term. The selling and capitulation, however, are often interpreted as indicators of a local bottom. In 2025, one of the most significant periods of realized losses occurred in August, which was followed by a market upturn.
During Bitcoin's slide from its October peak, capitulation did not manifest until the asset touched local lows below $85,000. Retail and short-term buyers sold to cut losses, whereas whales and long-term holders typically sold closer to the price peak. In September, short-term holders were more inclined to hold their assets despite unrealized losses. However, the accelerating price slide eventually pressured some buyers into capitulating at a lower price.
It is important to note that not all short-term holders sold at a loss. On average, these wallets have experienced a small net gain. The short-term holder realized price is above $104,000 per BTC on average, which is higher than the current market price. This average price suggests a segment of strategic short-term wallets is actively trading BTC, prepared to realize gains at a favorable price point.
Increased Volatility and Miner Distress
Bitcoin's volatility is indicating that the leading cryptocurrency is entering a more turbulent trading period. Volatility has expanded to 2.49%, approaching the highest range observed over the past 12 months. Typically, BTC volatility has remained below 2% throughout 2025, suggesting a more mature market phase. This current period serves as a reminder that BTC can still experience waves of panic, particularly following de-leveraging events.
BTC continues to trade with a fearful sentiment, as reflected by the Fear and Greed Index, which stands at 28 points. Further selling pressure may emerge from miners, who are now producing blocks under distressed conditions for the first time since August. The hash ribbon indicator has flashed again after a prolonged period of highly profitable mining. Historically, hash ribbon indicators have often coincided with local market bottoms or periods of heightened volatility.