Bitcoin Slumps Amid Steady Selling by Large Holders, Unrealized Losses Hit 2-Year High

Bitcoin continued to drift lower on Friday as any upward movement in the price was met by fresh sellers who had purchased the cryptocurrency near its all-time high of $126,000 reached in early October. The largest cryptocurrency has fallen nearly 30% from that record high, trading near $89,502 during New York hours, and analysts are noting a "mild bearish phase" defined by modest capital inflows being offset by steady selling pressure from large holders. Market observers highlighted the accumulation of unrealized losses as a growing concern, with relative unrealized losses jumping to 4.4%, the highest in nearly two years according to Bloomberg data.

The recent performance of Bitcoin has diverged from that of other risk assets, which have not seen the same level of rebound after recent declines. This break in the usual upside correlation has led analysts to point to weak liquidity and fading risk appetite as key factors in the ongoing price slump. The Federal Reserve's rate cut earlier in the week failed to generate renewed momentum in digital assets, further contributing to the market's consolidation phase.

The market's behavior is now being closely watched for signals on whether this is a temporary correction or the beginning of a more extended bearish trend. Analysts noted that Bitcoin's current price range is weak but bounded, with time itself acting as a negative force as more unrealized losses accumulate according to market analysis.

How Markets Reacted

Bitcoin's reaction to Federal Reserve interest rate decisions has historically been inconsistent, often defying traders' expectations. In 2025, Bitcoin's performance around FOMC meetings suggested that macroeconomic expectations were frequently priced in before the actual policy decisions were made. The pattern was particularly evident in the seven-day price outcomes following FOMC events, which ranged from a 6.9% gain to an 8% drop. Rate cuts, in particular, were followed by the largest drawdowns, with the September and October 25-basis-point cuts leading to declines of 6.9% and 8%, respectively according to Cointelegraph analysis.

Positioning in the market played a crucial role in determining outcomes. In the lead-up to several FOMC meetings-most notably in July, September, and October-funding rates and open interest surged, indicating an over-leveraged environment. These sharp inflows of capital and aggressive long positioning made Bitcoin more vulnerable to sell-offs once the Fed's decisions were officially announced according to market reports. Analysts also noted that volatility often compressed before a decision and expanded afterward, as traders used confirmed news to reduce exposure according to on-chain analysis.

What Analysts Are Watching

Market analysts are now closely monitoring several key indicators to assess Bitcoin's near-term trajectory. One is the liquidity environment, as thinning spot liquidity and declining stablecoin flows amplify volatility risk according to market data. Another is the performance of ETFs, particularly the IBIT fund, which has seen a six-week outflow streak, its longest negative stretch since its January 2024 launch according to CoinDesk reporting. These outflows now total over $2.7 billion in redemptions, signaling weakening demand.

On-chain data is also being used to gauge investor sentiment. Metrics like unrealized losses and realized capital flows provide insight into market health according to Glassnode data. For example, Glassnode reported that Bitcoin's supply in loss has risen sharply, reaching 7.1 million BTC, a level similar to early 2022 when the market entered a bear phase according to on-chain analysis. Additionally, the cost basis of supply held by top buyers has dipped below the 0.75 quantile, placing more than 25% of the supply underwater according to market data. This mirrors conditions seen at the start of the 2022 bear market, raising concerns about potential capitulation risks.

Risks to the Outlook

The market faces several potential risks in the coming months, starting with macroeconomic developments. A hawkish surprise from the Fed could delay liquidity expansion and prolong the current consolidation phase into early 2026 according to Investing.com analysis. On the other hand, a dovish stance with continued balance-sheet expansion could support a renewed upward trend, particularly if ETF inflows and institutional reallocation remain strong according to market forecasts.

Another risk comes from the crypto sector's structural vulnerabilities. With more than $350 billion in unrealized losses across the crypto market, including $85 billion in Bitcoin alone, the ecosystem remains exposed to further sell-offs if sentiment deteriorates according to market reports. Whale activity has also increased, with large holders depositing assets on exchanges, a move that could precede selling according to on-chain data.

Lastly, the long-term outlook for Bitcoin depends on its ability to maintain institutional conviction despite short-term volatility. Analysts from multiple on-chain analytics firms agree that the market structure remains bullish above $90,000 according to market consensus. However, a drop below $89,000 could trigger a pullback to $86,500 before new demand reappears according to technical analysis. This uncertainty underscores the importance of risk management and liquidity monitoring for investors navigating the coming weeks.

What This Means for Investors

Investors are being advised to adopt a cautious approach as the market navigates this volatile phase. Technical indicators show a short-term bullish shift as Bitcoin crosses above the EMA20, supported by negative exchange netflows indicating accumulation according to on-chain data. However, longer-term EMAs and a Directional Movement Index at 17 suggest bearish forces remain in play according to technical analysis. The EMA50 at $96,476 is a key resistance level to watch-if breached downward, historical data suggests retests of lower supports could follow according to market data.

Strategically, investors are encouraged to consider risk-reversal structures, rolling over positions, and capturing skew through options trading according to trading strategy analysis. Defensive positioning is also being emphasized as a prudent approach during this time of uncertainty. The focus is on survival over betting on a "Santa rally," with experts suggesting that managing leverage and monitoring open interest may be key to navigating the season according to market commentary.