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Bitcoin’s market conditions may be heading into a more fragile phase, according to new insights from on-chain analytics firm Glassnode. The company’s latest weekly report highlights a major decline in liquidity across the Bitcoin network, particularly among newer investors who have been realizing heavy losses as prices continue to soften.
The analysis arrives at a time when Bitcoin remains under pressure following weeks of volatility, prompting traders and analysts to look deeper into blockchain data for clues about the asset’s next move. According to Glassnode, the behavior of both short-term and long-term holders is beginning to paint a more cautionary picture.
Short-Term Holders Show Major Weakness as Losses Intensify
Glassnode measures liquidity using the Realized Profit/Loss Ratio, a metric that compares the total realized gains versus realized losses across investor transactions. When this ratio falls sharply, it often signals shrinking liquidity and elevated stress among market participants.
A more focused version of this indicator tracks the sentiment of short-term holders (STHs)—investors who acquired their coins within the last 155 days. These holders typically reflect the current demand momentum in the market.
According to the analysis, the STH Realized Profit/Loss Ratio has collapsed since early October. The reading is currently sitting near 0.07, which places it deep in the loss-dominated region. This means that new buyers have largely been selling their coins at a loss, suggesting widespread capitulation.
Glassnode notes that this dramatic shift confirms a “serious evaporation of liquidity,” especially after months in which long-term holders absorbed a significant amount of demand during the second and third quarters of 2025.
The last time the indicator fell to such low levels was in early 2022, during a period of extended market weakness. While the current cycle hasn’t yet reached that duration of stress, the firm warns that if the ratio remains depressed, conditions could begin to resemble those earlier bearish phases.
Long-Term Holders Still Show Strong Liquidity — For Now
While short-term momentum has taken a strong hit, the situation is less severe among long-term Bitcoin holders (LTHs). These investors typically hold for more than 155 days and are seen as the more conviction-driven side of the market.
To assess long-term liquidity, Glassnode also examines the Realized Profit/Loss Ratio for LTHs. Although the long-term ratio has declined alongside the recent downturn, it remains significantly higher than levels seen during previous market lows.
Current data shows the LTH ratio holding at approximately 408, which means long-term holders are still realizing profits at levels far above their realized losses. This contrasts sharply with the short-term ratio and indicates that long-term liquidity remains structurally strong.
However, Glassnode cautions that this strength may not last if the market continues to weaken. The firm states that if the long-term ratio were to drop toward 10x or lower, it would substantially increase the risk of transitioning into a deeper bearish phase.
Why This Ratio Matters for Bitcoin’s Broader Outlook
The Realized Profit/Loss Ratios serve as key indicators for identifying shifts in market health. When both short-term and long-term liquidity collapse simultaneously, it often marks a transition toward a sustained downtrend. This is because seller fatigue grows, market confidence weakens, and fewer participants are willing to re-enter aggressively.
While Bitcoin’s long-term investors are still showing resilience, the current decline in their ratio signals growing pressure. Combined with the steep deterioration among short-term holders, this may indicate that overall liquidity is tightening across the network.
Glassnode’s warning underscores that Bitcoin’s stability in the coming weeks may largely depend on whether long-term holders continue to maintain strong realized profits—or whether their liquidity compresses further.
Looking Ahead: Will Liquidity Continue to Shrink?
With Bitcoin facing sustained volatility, all eyes are now on the behavior of long-term holders. If their profit advantage begins to narrow significantly, it may signal a broader market shift.
On the other hand, if Bitcoin stabilizes and demand strengthens—especially from institutional buyers or exchange-traded products—long-term liquidity could remain healthy enough to prevent the market from slipping into a deeper bearish phase.
For now, the market remains in a wait-and-see mode. Traders and analysts will be closely watching whether Bitcoin’s liquidity ratios continue to compress, or whether renewed demand can support a stronger recovery.
