Bitcoin Market Enters Distribution Phase as Veteran Holders Lock In Profits

Recent on-chain signals suggest that the current phase is being shaped less by panic selling and more by deliberate positioning from experienced market participants, even as fear grows among newer investors.

According to analysis shared by crypto analyst Joao Wedson and on-chain platform Alphractal, Bitcoin has recorded four clear distribution signals from long-term holders (LTHs) for the first time in its history. These signals indicate that older coins, many of which had remained inactive for extended periods, have re-entered circulation since early 2024.

The Reserve Risk Indicator, which tracks movements of long-held coins, is particularly sensitive to activity from early investors and large holders. Data shows that a meaningful volume of dormant BTC has flowed into exchanges, ETFs, institutional vehicles, and retail markets. From an on-chain perspective, this behavior appears calculated rather than reactive, suggesting that early participants used strong liquidity conditions and heightened institutional interest to realize profits.

Persistent selling keeps price locked in range

Despite multiple recovery attempts, Bitcoin has struggled to build sustained upside momentum. Recent weeks have been marked by a sideways-to-downward trend within a defined horizontal range, with each bounce quickly meeting renewed selling pressure.

Market data suggests that investors who entered near recent record highs, particularly in early October, are treating rallies as opportunities to reduce exposure. This behavior has reinforced overhead resistance and limited follow-through on upside moves.

Glassnode describes current conditions as a “mild bearish phase,” noting that capital inflows remain insufficient to absorb steady selling from larger market participants. As a result, Bitcoin remains stuck in what the firm characterizes as a weak but bounded range, with prolonged consolidation beginning to weigh on sentiment.

Unrealized losses and volatility trends raise caution

Another notable shift is the rise in unrealized losses across the network. Glassnode reports that the relative unrealized loss rate has climbed to 4.4%, the highest reading in the past two years. This suggests a transition away from euphoric conditions toward a more stressed and uncertain market environment.

At the same time, implied volatility has continued to decline. Historically, volatility tends to compress further after the final major macro events of the year, including the December FOMC meeting. Glassnode warns that, barring a hawkish surprise, volatility could fall further as gamma sellers return, pushing Bitcoin into a low-liquidity, mean-reverting structure. While this typically favors sideways price action, it also increases the risk of sharp moves if positioning becomes crowded.

Fear reaches cycle extremes, analysts note

Adding to the cautious outlook, popular market commentator Crypto Rover highlighted that current fear levels are the highest seen at any point during the entire Bitcoin cycle. A chart shared by the analyst suggests that sentiment has deteriorated more sharply than during previous pullbacks, even as price remains well above long-term historical averages.

This divergence between relatively elevated price levels and extreme fear may reflect exhaustion among short-term participants rather than broad capitulation. Some analysts interpret this as a sign that weaker hands are under pressure, while more experienced investors continue to operate based on longer-term frameworks.

Macro headwinds and cycle debate continue

Bitcoin is on track to close the week largely flat, masking a significant pullback from its all-time high near $126,000 in early October. The asset has declined roughly 30% since that peak and has recently failed to rebound alongside other risk assets during recovery attempts.

Analysts point to weak liquidity conditions and reduced risk appetite following the U.S. Federal Reserve’s latest rate cut, which failed to generate meaningful upside for digital assets. FxPro senior analyst Alex Kuptsikevich argues that the crypto market has already entered a bear phase, warning that recovery attempts may continue to attract sellers rather than fresh demand.

Still, Wedson pushed back against claims that Bitcoin’s cycle dynamics are no longer relevant. He maintains that market behavior has remained consistent with past cycles and argues that the underlying mathematical and fractal structure governing Bitcoin’s long-term movements remains intact, despite near-term weakness.

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