According to the latest "Bitfinex Alpha" report, the price of BTC is waiting for demand from long-term holders or institutions to absorb the recent selling pressure from short-term holders.

Since reaching an all-time high of $109,590 on January 20, the decline in BTC has intensified concerns about the role of institutional investors in maintaining market momentum. Recently, the price of BTC fell below $77,000, a 29.7% pullback from its peak, marking the second-largest correction in the current bull market cycle.

Historically, a 30% pullback often signals a market rebound, but the current situation indicates that "well-capitalized investors" have not fully absorbed the selling pressure.

Institutional Fund Flows and Market Stability

Institutional adoption of BTC, primarily driven by spot BTC ETFs and corporate accumulation, has played a key role in reducing the depth of this market cycle's pullback.

Past pullbacks have ranged between 18% and 22%, highlighting a trend towards shallower corrections.

However, the current 29.7% decline suggests that institutional support has weakened. The report notes that in the five trading days last week, there were four days where ETF outflows reached $921.4 million, further reinforcing this trend.

Without a new round of buying from institutional investors, BTC may face the risk of long-term price consolidation or further declines.

Intensified Selling Pressure

Market data shows that BTC short-term holders (STH), defined as "wallet addresses holding BTC for less than 180 days," are increasingly selling at a loss.

When the price falls below $90,000, STHs experience unrealized net losses, which has historically been a catalyst for increased selling pressure.

A particularly vulnerable segment of this group is the "small shrimp" addresses, which hold less than 1 BTC. They often sell BTC to cut losses when prices rebound after a prolonged period of unrealized losses.

The recent trend in the cost basis of BTC buyers further illustrates the weakening demand. In a strong market, the cost basis of those buying BTC in the past 7 to 30 days is typically higher than that of those who bought 1 to 3 months ago, indicating bullish sentiment.

However, this pattern reversed in the first quarter of 2025, as new market entrants hesitated to absorb market supply. This shift coincided with BTC falling below $90,000, reflecting a transition from momentum after reaching an all-time high to a risk-averse environment.

Key Indicators Reflect Market Caution

The short-term holder spent output profit ratio (STH-SOPR) is a key indicator for assessing the current selling pressure on BTC. It measures whether STHs are selling at a profit or a loss.

Since BTC fell below $95,000, the 30-day moving average of STH-SOPR has remained below 1, indicating that most short-term investors are selling at a loss.

This indicator is neutral at 1, and when BTC briefly reached $78,000, the indicator dropped to 0.97. This trend marks one of the most severe capitulation events in this cycle.

Ongoing downward pressure has led to broader market caution, prompting short-term participants to continue selling. Historically, such conditions signal local seller exhaustion, where weaker investors exit, and stronger hands begin to accumulate again.

Long-term investors typically monitor these conditions for potential re-entry opportunities, recognizing that deeply negative STH-SOPR readings can serve as contrarian buy signals.

The report notes that as BTC experiences one of the most significant pullbacks in this cycle, the response from institutional investors will be crucial in determining the next phase of the market.

If institutional capital flows back significantly, it could provide the necessary support for a rebound in BTC prices. However, without renewed interest from well-capitalized investors, the price trajectory of BTC may remain sluggish, characterized by continued range-bound fluctuations or further declines.

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