Who is Truly Driving Bitcoin's Sell-Offs: Short-Term Profit-Takers or Long-Term Capitulation?

The debate over whether Bitcoin's sell-offs are driven by short-term profit-takers or long-term capitulation has taken center stage in 2023–2025, as on-chain data reveals a nuanced interplay between these two groups. While both cohorts have contributed to downward pressure, the evidence suggests that short-term holders (STHs) have played a more immediate and decisive role in recent corrections, while long-term holders (LTHs) have exhibited a more measured, strategic distribution pattern. This analysis unpacks the behavioral and structural dynamics shaping Bitcoin's price action, drawing on on-chain metrics, historical precedents, and macroeconomic context.

Short-Term Holders: Profit-Taking and Capitulation in a Volatile Year

Short-term holders dominated Bitcoin's 2025 narrative, despite the asset's negative year-to-date return. According to a report by , STHs were profitable for 66% of 2025, as frequent price rebounds above their realized cost basis allowed for repeated profit-taking. This resilience, however, began to unravel in late October 2025, when Bitcoin fell below the STH cost basis of ~$100,000, triggering a 45-day period of losses and pushing unrealized losses to -12%.

The Spent Output Profit Ratio (SOPR), a critical on-chain metric, fell below 1, signaling that STHs were selling at a loss-a classic sign of capitulation. This behavior aligns with historical patterns where STH capitulation often precedes market bottoms, though recovery hinges on sufficient buying demand to absorb the selling pressure. Data from Glassnode further underscores this fragility: the STH loss ratio reached 0.07x in November 2025, reflecting overwhelming loss dominance and evaporated liquidity.

Notably, STHs' selling activity was concentrated above $115,000 during the October 2025 correction, indicating a shift from speculative trading to mid-term holding. This suggests that while STHs drove immediate volatility, their behavior was reactive to broader market conditions rather than a structural breakdown.

Long-Term Holders: Measured Distribution and Structural Fatigue

Long-term holders, in contrast, have exhibited a more deliberate and strategic approach to distribution. According to , LTH supply declined by approximately 300,000 BTC since July 2025, with sales occurring during price declines rather than breakouts. This marked a departure from earlier in the cycle, when LTHs sold into strength, and signaled deeper fatigue and reduced conviction.

While LTHs historically dominate Bitcoin's supply (controlling over 70% of the total stock), their behavior in 2025 has been characterized by measured distribution rather than panic selling. For instance, in November 2025, LTHs sold around 400,000 BTC in 30 days, but this represented a modest 2.2% drop in supply compared to more aggressive cycles like March 2024 which reduced liquid supply. This suggests that LTHs were engaging in early profit-taking rather than capitulation, a behavior reinforced by their accumulation of newly mined BTC in Q2 2025, which reduced liquid supply and supported price resilience.

However, LTHs are not entirely immune to market stress. As Bitcoin's price fell from $126,000 to $90,000 in late 2025, their unrealized gains shrank from 450% to 130%, reflecting growing exposure to downside risk. The LTH 30-day net position change has remained heavily negative, indicating sustained distribution. Yet, unlike STHs, LTHs have not exhibited extreme capitulation, with relative unrealized losses remaining below the 5% threshold-a sign of moderate bearishness rather than panic.

Market Structure and the Role of On-Chain Metrics

Bitcoin's current market structure is defined by a fragile equilibrium, with price trading below key cost-basis levels. The STH realized price sits near $100,000, while the Active Investors' Realized Price is at ~$88.5K according to Glassnode data. This divergence highlights the tension between short-term and long-term holders, with STHs under acute pressure and LTHs maintaining a more defensive stance.

On-chain indicators like the aSOPR (Adjusted Spend Output Profit Ratio) and Puell Multiple further illustrate this dynamic. The aSOPR hovered around 1.02–1.04 in late 2025, slightly above breakeven but far from the euphoric levels seen in previous cycles. Meanwhile, the Puell Multiple (1.2–1.4) suggested miner profitability remained healthy but not extreme. These metrics point to a market in defensive consolidation rather than a full-blown bear phase.

Wallet turnover rates and price-level correlations also reveal structural shifts. Active addresses and transaction volumes surged during rally phases in 2025, reflecting heightened investor engagement. Conversely, corrections saw declines in these metrics, underscoring market caution.

Notably, whale activity-particularly inflows to exchanges-correlated with 47% of volatility spikes in November 2025, highlighting the outsized influence of large holders on liquidity and sentiment.

Historical Precedents and Macroeconomic Context

Historical analogs provide further clarity. The 2019 mini-bear market, for instance, featured a 6-month correction that preceded a powerful rally as macroeconomic conditions improved. A similar scenario could unfold in 2026 if liquidity conditions stabilize and Bitcoin consolidates around the $81,000 True Market Mean. However, the 2025 sell-offs also reflect Bitcoin's growing correlation with traditional assets. As noted by , Bitcoin's correlation with the S&P 500 and NASDAQ 100 rose to 0.5 and 0.52, respectively, in 2025, driven by institutional adoption and macroeconomic factors like Fed rate decisions.

The October 2025 liquidation event-where $19.37 billion in leveraged positions were wiped out-exemplifies this interconnectedness. Such events amplify market fears and underscore the role of macro risk aversion in driving Bitcoin's price action.

Conclusion: A Market at a Crossroads

Bitcoin's 2023–2025 sell-offs have been shaped by a complex interplay of STH profit-taking and LTH distribution. While STHs have driven immediate volatility through capitulation and loss dominance, LTHs have acted as a stabilizing force through measured selling and strategic accumulation. The market's ability to reclaim key cost-basis levels-particularly the STH realized price of $100,000-will determine whether this phase marks the end of a correction or the start of a deeper bear market.

For investors, the takeaway is clear: short-term holders remain the most immediate source of selling pressure, but long-term holders' behavior suggests a market in transition rather than collapse. As on-chain metrics and macroeconomic conditions evolve, the path forward will depend on renewed inflows, institutional confidence, and the resolution of broader liquidity challenges.