Bitcoin’s four-day drop to $104,000 triggered what analysts call a “defensive rotation” among crypto investors, but on-chain data suggests the correction was a healthy reset rather than the start of a broader market crash.
Bitcoin (BTC) experienced a four-day sell-off last week, dropping from $115,000 last Tuesday to a four-month low of $104,000 by Friday, a level last seen in June, according to TradingView data.
Analysts said that despite the steep decline, the correction helped eliminate overleverage and encouraged investors to shift from profit-seeking to capital preservation. Blockchain analytics firm Glassnode said in a report on Tuesday that the supply of short-term Bitcoin holders is increasing, suggesting that “speculative funds” are taking a larger share of the market.
“On-chain, the supply share of short-term holders continues to rise, suggesting that speculative capital is becoming more dominant,” Glassnord said, adding:
“This combination of signals indicates that the market is moving into protection mode, with traders prioritizing capital preservation over directional bets.”
Meanwhile, Bitcoin open interest has fallen by about 30%, suggesting the crypto market is “much less vulnerable to a new liquidation cascade,” Glassnode said in an X post on Tuesday.
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Glassnode’s report comes at a time of heightened uncertainty regarding the continuation of the crypto market cycle.
“This $1 million to $2 million range is a tough time for those with weak beliefs in HODL Bitcoin,” Jan3 CEO Samson Mo said in an X post on Monday, adding:
“Uncertainty is high, in part because the ‘cycles’ we’ve seen in the past are not occurring, and other assets such as gold are rallying.”
Mow predicted that Bitcoin “will add zero soon,” but cautioned that “paper-handed” investors with low conviction should not be shaken off by a temporary correction.
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Meanwhile, long-term Bitcoin holders continue to sell to institutional investors, according to Glassnode analyst Chris Beamish.
Digital assets (DATs) and exchange-traded funds (ETFs) are absorbing an “incredible amount” of long-term holders’ supply, but until this group stops selling, Bitcoin’s upside will remain limited, analysts wrote in a post on Monday.
But Bitcoin ETFs have also been hurt by the political turmoil surrounding President Donald Trump’s threat of new tariffs against China.
Bitcoin ETFs recorded $40 million worth of net outflows on Monday, marking the fourth consecutive day of selling, Cointelegraph reported.
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