Bitcoin’s price has taken a significant hit, losing over 6.88% in just 24 hours, with the cryptocurrency hitting a 5-month low of $74,000. The sharp decline in value has led to panic among Bitcoin’s short-term holders (STHs), who are rapidly exiting the market as their investments turn into losses.

Short-Term Holders in Panic Mode

In times of market volatility, short-term holders are typically the first to react. Their response is often to sell off their assets to cut losses, and this behavior is being captured by the STH-SOPR (Short-Term Holder Spent Output Profit Ratio). When the STH-SOPR falls below 1.0, it indicates that short-term holders are realizing losses, which is often a signal of capitulation—when holders give up hope and exit the market in mass.

At the time of writing, the STH-SOPR dropped to 0.98, signaling that Bitcoin’s short-term holders are indeed in full capitulation mode. This sharp drop in the STH-SOPR is reminiscent of a similar pattern observed in 2024 when panic selling followed a decline below the -2 standard deviation band.

Increased Selling Activity from All Market Participants

Bitcoin’s struggles aren’t just limited to short-term holders; the market as a whole is showing significant bearish sentiment. Recent data from CryptoQuant and IntoTheBlock reveals a marked increase in selling activity across all market participants, including whales and retail investors.

Bitcoin has experienced three consecutive days of positive exchange netflows, which means that more Bitcoin is flowing into exchanges than out. This suggests that more market participants are choosing to sell rather than buy, which further adds to the selling pressure in the market.

Large holders or whales have also joined in on the selling trend. Their netflow to exchange ratio spiked to 0.53% in the last 24 hours, indicating that even the largest Bitcoin holders are moving their assets to exchanges for sale. This lack of confidence from whales, who typically hold significant influence over the market, is a worrying sign for Bitcoin’s short-term outlook.

Rising Bitcoin Supply and Lower Demand

With increased selling pressure and the rising supply of Bitcoin, the cryptocurrency is under further strain. The stock-to-flow ratio has spiked from 35.2k BTC to 43.8k BTC over the past day, which indicates that there is more Bitcoin available for sale than the market is currently absorbing. When supply increases while demand remains low, the price typically falls, and Bitcoin’s price decline may continue if these conditions persist.

What’s Next for Bitcoin?

Given the ongoing selling activity and rising supply, Bitcoin risks further downside in the near future. The cryptocurrency could drop to around $71,858 if the current bearish trend continues.

For a bullish reversal, Bitcoin needs to reclaim the psychological level around $80,000. If Bitcoin can regain this support level, it may signal a shift in market sentiment and offer hope for a price recovery. However, with short-term holders and whales continuing to sell, the worst may not be over yet for Bitcoin.

In conclusion, while Bitcoin’s recent price drop signals concern, it’s clear that the market will need to see a major shift in buying activity and investor confidence for the cryptocurrency to reverse its current trend.