Bitcoin Faces Early Bear Market Signs As Short-Term Holders Suffer 20% Unrealized Losses

New data from the market intelligence firm Glassnode suggests that Bitcoin (BTC) could be nearing an early bear market. The crypto analytics platform has identified several key indicators that historically precede a bearish phase. One of the most significant signs is the substantial unrealized losses held by short-term holders relative to the current price of Bitcoin. This situation mirrors early bear market conditions observed in previous cycles, indicating that short-term holders are already experiencing significant losses.

Glassnode also notes that while long-term holders are currently in profit, market conditions could lead to a reduction in their gains. This shift, where long-term holders start to see their profits dwindle, has historically marked the confirmation of a bear market. However, this regime has not yet been evident in the current cycle. Short-term Bitcoin holders are defined as those who have held their tokens for less than 155 days, while long-term holders are those who have kept their digital assets inactive for 155 days or longer.

Another critical metric highlighted by Glassnode is the volatility-adjusted net realized profit/loss for BTC, which has reverted to its long-term median. This historically marks the boundary between bull and bear regimes, placing the market at a critical juncture for determining its direction. The directional dominance of value flowing in or out of the network shows that Bitcoin is at a crucial crossroads in terms of market direction.

According to the analyst's forecast, the current market conditions suggest that Bitcoin could be approaching an early bear market phase. The increasing balance of long-term holders, which often precedes a bear market, indicates that these investors are accumulating more BTC, a behavior typically seen when investors anticipate a prolonged period of price decline. However, the historical bear market confirmation, which usually involves a significant drop in price and a prolonged period of low activity, has not yet materialized in the current cycle. This absence of a clear bear market signal adds to the uncertainty surrounding Bitcoin's near-term prospects.

Despite the bearish indicators, the largest Bitcoin investors, often referred to as "mega whales," have continued to buy, suggesting a level of confidence in the asset's long-term value. Short-term holders, who acquired BTC at higher prices during recent peaks, are currently facing rising unrealized losses. These losses, calculated by comparing current market prices to the average acquisition cost, have significantly increased, raising concerns about the sustainability of the recent bull run. While long-term holders remain broadly in profit, they too are approaching a critical threshold. Continued downward pressure on BTC's price could potentially erode their gains, especially if bearish momentum intensifies.

Historically, similar patterns of rising unrealized losses have signaled the early stages of bear markets. However, the current corrections are not as steep as those seen in previous cycles. The evolving on-chain landscape underscores a pivotal moment for Bitcoin. While not yet confirming a full-blown bear market, the metrics suggest caution among retail and institutional players alike. The market's ability to hold above key levels and shake off mounting unrealized losses will determine its near-term direction. As Bitcoin consolidates near $85,000, all eyes remain on whether long-term holders can anchor price stability or if another wave of selling pressure will trigger deeper corrections.