Bitcoin's Evolving Distribution Dynamics: Why $85K and $91K Define the Next Bull or Bear Phase

Bitcoin's price action in late 2025 has crystallized into a fragile equilibrium between $85,000 and $91,000, a range that now serves as a critical battleground for the asset's next directional move. This volatility is not merely a function of macroeconomic noise but a reflection of deeper structural shifts in on-chain behavior, particularly among long-term holders (LTHs) and the liquidity dynamics underpinning these price levels. As the market tests these thresholds, the interplay between distribution patterns and liquidity depth will determine whether Bitcoin enters a new bull phase or spirals into a deeper correction.

The Liquidity Crossroads: $85K and $91K as Structural Anchors

The $85,000–$86,000 zone has emerged as a structurally significant support level, reinforced by a confluence of historical cost basis levels, including the 2024 yearly cohort cost basis and aggregated spot-product cost basis. This convergence suggests a concentration of investor demand, where market participants are more likely to defend positions during pullbacks. Conversely, the $91,000 level has transitioned from resistance to support after multiple rejections, with on-chain data revealing a notable accumulation of resting bids in this range. However, the order book depth remains shallow, and a breakdown below $85K would likely expose the next support pocket at $81K, the so-called "True Market Mean."

The fragility of this range is underscored by the collapse of the short-term holder (STH) profit/loss ratio to 0.07x, a metric that historically signals eroding liquidity, and investor confidence. Meanwhile, the broader market carries $350 billion in unrealized losses, with Bitcoin alone accounting for $85 billion according to market analysis. This imbalance highlights the precariousness of leveraged positions and the vulnerability of the current price structure to sudden shifts in sentiment.

Long-Term Holder Behavior: A Tale of Three Sell Waves

Long-term holders have played a pivotal role in shaping Bitcoin's distribution dynamics this cycle. By late 2025, LTH supply had fallen to 14.34 million BTC, the lowest level since May 2025, marking the third distinct wave of selling following the U.S. spot ETF approvals and the Trump-era price surge to $100,000. Unlike traditional bull markets, which typically feature a single major distribution phase, this cycle has seen repeated sell waves absorbed by the market, reflecting a fragmented accumulation of profits by short-term holders (STHs).

The LTH Realized Profit/Loss Ratio has dropped to 408x, a level that, while still positive, indicates weakening momentum. If this metric compresses toward 10x or below, it would signal a transition into bear market conditions. Notably, persistent accumulation by bullish wallets-defined as large holders with no history of selling-has added 75,000 BTC to the market in early December, suggesting pockets of resilience. However, this support is being tested as the broader market grapples with $350 billion in unrealized losses.

The Shift in Ownership: From LTHs to STHs

The transfer of Bitcoin from long-term to short-term holders has accelerated in late 2025, with STHs accumulating 1.8 million BTC since July, while LTHs distributed 1.78 million BTC in the same period. This dynamic aligns with late-cycle bull market patterns, where profit-taking intensifies and volatility rises. The STH cohort's dominance is further amplified by the STH/LTH ratio, which has surged to 18.5%, reflecting a market increasingly driven by speculative activity.

This shift has implications for Bitcoin's price trajectory. STHs are more likely to liquidate positions during downturns, exacerbating short-term volatility. However, the recent accumulation by bullish wallets and the Fed's rate-cut expectations (now priced at 80–85% for December) provide a counterbalance. The challenge lies in whether spot demand can stabilize above the $84,000 cost basis and whether institutional selling pressure, as measured by the Coinbase Premium Index, will abate.

Macro Factors and Market Sentiment

The broader macroeconomic environment remains a wildcard. The Fed's rate-cut cycle and liquidity programs have injected optimism, with volatility metrics for Bitcoin and the S&P 500 declining. This has reduced demand for Bitcoin put options and stabilized sentiment, though the market remains in a fragile equilibrium. Institutional selling, while easing, persists, and the futures market is characterized by orderly deleveraging, rather than new long positions.

The coming weeks will be critical. A sustained break above $93,000–$95,000 could trigger a rally toward $97,000–$100,000, while a breakdown below $85K would likely retest the $81K floor. The key variable will be the behavior of LTHs: if their selling pressure abates and their Realized Profit/Loss Ratio stabilizes, it could signal a shift in market structure. Conversely, continued distribution would reinforce bearish momentum.

Conclusion

Bitcoin's next phase hinges on the interplay between liquidity depth at $85K and $91K and the evolving behavior of long-term holders. The current range reflects a market in transition, where late-cycle dynamics and macroeconomic tailwinds collide. Investors must monitor on-chain metrics like the LTH Realized Profit/Loss Ratio and order book depth, as these will provide early signals of a potential breakout or breakdown. For now, the market remains in a delicate balancing act, with the outcome dependent on whether structural support at $85K holds and whether LTHs pivot from sellers to stabilizers.