Bitcoin’s short-term stability has come under scrutiny following Bitfinex’s recent analysis. Despite reaching its peak just over a week ago, the cryptocurrency appears to be in a consolidation phase. Bitfinex analysts hold that while the structural integrity of the asset remains unscathed, the bull market is transitioning into a more sensitive and responsive stage.
In its weekly Alpha report, Bitfinex indicated a normal rotation among bitcoin’s holder cohorts. This capital shift signals an evolving cycle, but it also exposes BTC to a potential short-term vulnerability, especially if demand diminishes.
For the first time since 2024, long-term bitcoin holders have started to offload their holdings to secure profits. This group of investors has increased the amount of BTC they send to exchanges and newer wallets. As they divest their assets, new market players like exchange-traded funds (ETFs), institutional buyers, and retail investors are stepping in to take up the supply.
A significant chunk of these purchases can be attributed to ETFs and bitcoin treasury companies. This transition from long-standing holders to more recent ones is typical of every bull cycle. However, the intensity of spot demand will decide whether BTC will enter a cooling-off period or spark another rally.
Currently, on-chain data reveals that the majority of the BTC supply is now in profit. Bitcoin’s spot price has skyrocketed past the 95th percentile level, pointing to a significant increase in investors sitting on unrealized profits. Such conditions often encourage high profit-taking from short-term holders and opportunistic investors.
Consequently, the market sees a supply redistribution to fresh buyers at elevated prices. This could instigate a short-term bitcoin uptrend but could also destabilize the market structure and increase the cost basis. Bitfinex warns that steep price drops in such situations could trigger wider declines, heightening the risk of volatility and corrective phases, particularly if buyer momentum wanes.
Meanwhile, altcoins are experiencing what analysts term “an aggressive catch-up rally.” Investors are now transferring their capital from BTC to large-cap altcoins in search of extra returns.
Leading the pack are major altcoins like ether (ETH) and Solana (SOL), which are outperforming BTC for the first time since November 2024. The Others Index, a tool that gauges the performance of cryptocurrencies excluding the top 10 assets by market capitalization and stablecoins, has rocketed by at least 35% in two weeks, contributing nearly $85 billion.
Simultaneously, bitcoin’s dominance has dipped by 6.9%, marking seven consecutive daily declines for the first time since December 2023.
