Bitcoin's Structural Stagnation and Hidden Supply Constraints: A Liquidity and Range-Bound Analysis

Bitcoin's price action in 2025 has been defined by a paradox: a market that appears technically robust on the surface but is structurally fragile beneath. Despite periodic rallies and institutional interest, the cryptocurrency remains trapped in a narrow range, oscillating between $85.6k and $93k. This stagnation is not merely a function of market sentiment but a consequence of deeper, systemic issues: liquidity fragmentation and overhead supply constraints. These forces, amplified by macroeconomic headwinds and fragmented market infrastructure, have created a self-reinforcing cycle of volatility and underperformance.

Liquidity Fragmentation: The Illusion of Depth

Bitcoin's liquidity crisis in 2025 has exposed the fragility of its market structure. According to a report by Investing.com, liquidity across centralized and decentralized exchanges has thinned significantly, particularly during periods of stress. In late 2025, order books showed stark imbalances, with sellers vastly outnumbering buyers, leading to chaotic price gaps and rapid sell-offs. This phenomenon was exacerbated by the U.S. government shutdown in November 2025, which withdrew approximately $200 billion from the market, intensifying capital shortages and accelerating the contraction of crypto liquidity.

The fragmentation of liquidity across exchanges has further compounded the problem. S&P Global's analysis highlights that trading volumes for Bitcoin vary dramatically by venue, with less liquid platforms like Zaif and KuCoin experiencing extreme slippage during the August 2024 sell-off. For instance, stablecoin pairs-typically the most liquid-saw slippage of up to 15% as market depth evaporated. This dispersion of liquidity has created a "race to the bottom" among exchanges, where thin order books and high slippage erode confidence in price discovery.

Overhead Supply: The Invisible Ceiling

While liquidity issues explain Bitcoin's volatility, the structural stagnation is rooted in its supply dynamics. On-chain data from Glassnode reveals a dense accumulation of Bitcoin in the $93k–$120k range, forming a "supply wall" that acts as a ceiling for price rallies. This overhead supply, held by long-term holders, creates a bearish overhang, as any upward movement triggers selling pressure from profit-taking or loss-realization.

The impact of this supply concentration is amplified by options expiry mechanics. In Q4 2025, concentrated options expiries on December 19 and 26 incentivized market makers to "sell rallies and buy dips," reinforcing the $81k–$93k range. This mechanical pinning, combined with thin liquidity, led to erratic price swings, such as the $3,000 hourly surge and subsequent $6,000 drop on December 17. Meanwhile, over 23.7% of Bitcoin's circulating supply remains held at a loss, with 360k BTC attributed to loss sellers. As this supply matures into long-term holdings, the risk of capitulation-driven sell-offs increases, further constraining upward momentum.

The Interplay of Liquidity and Supply: A Range-Bound Equilibrium

The convergence of liquidity fragmentation and overhead supply has created a self-perpetuating range-bound environment. Futures markets reflect this equilibrium: open interest has trended downward and funding rates have stabilized near neutral levels, signaling reduced speculative conviction. Similarly, options activity is dominated by premium harvesting, with large December expiries limiting directional bets. This lack of conviction underscores a market in limbo, where buyers and sellers are equally hesitant to commit.

The November 2025 crypto crash-a 36% drop in Bitcoin's price and a $1 trillion market cap loss-exemplifies the fragility of this equilibrium. Analysts attribute the crash to macroeconomic factors, including Fed policy uncertainty and large-scale ETF outflows. However, the underlying issue remains structural: a liquidity-driven clash with overhead supply has become the primary driver of volatility.

Implications for Investors

For investors, Bitcoin's structural stagnation presents both risks and opportunities. In the short term, the range-bound environment is likely to persist until either liquidity conditions normalize or overhead supply is absorbed. However, long-term models suggest a potential inflection point if liquid supply drops below 2 million Bitcoin-a threshold that could trigger hyperbolic price appreciation. While such scenarios remain probabilistic, they highlight the critical role of supply dynamics in shaping Bitcoin's trajectory.

In the interim, investors must navigate a market defined by thin liquidity and overhead supply. Strategies that prioritize liquidity-such as trading on deep-order-book exchanges or hedging with options-may offer better risk-adjusted returns. Meanwhile, macroeconomic developments, particularly Fed policy and institutional adoption, will remain pivotal in determining whether Bitcoin breaks out of its range or succumbs to further capitulation.