Introduction
Bitcoin’s recent decline has traders questioning whether the market has found a bottom. On-chain metrics indicate unrealized losses remain shallow compared to historical capitulation levels. Meanwhile, technical signals and Federal Reserve policy shifts add further pressure to the cryptocurrency’s price action.
Key Points
- Short-term Bitcoin holders currently show -18% unrealized losses, well above the -37% threshold that historically signaled major buying opportunities.
- CME Bitcoin futures have formed a death cross (50-day MA below 200-day MA) for the first time since 2022, while open interest dropped 42% in two months.
- Price action remains range-bound between $89,250 and $94,000, with Federal Reserve policy and on-chain metrics suggesting further downside risk before a sustained reversal.
On-Chain Losses Signal More Downside Potential
Current on-chain data suggests Bitcoin’s correction may not be over. Crypto analyst Ali Martinez points to a critical historical pattern: when the average unrealized loss for short-term holders—those holding coins for one to three months—drops below -37%, it has often marked strong entry points and market bottoms. As of December 8, this metric stands at just -18%, indicating that while market pain exists, it remains far from the extreme levels seen during previous capitulation phases.
These previous drops below -37% occurred in early 2020, mid-2022, and late 2023, each time preceding a significant market reversal and upward move. Currently, Bitcoin trades near $90,400, substantially below its realized price of approximately $112,300, meaning a large portion of the market remains underwater on their investments. This gap between current losses and historical bottom-forming levels raises a red flag for traders looking for a definitive low.
Technical Breakdown and Fed Pressure Weigh on BTC
The technical picture for Bitcoin has deteriorated significantly. Following the US Federal Reserve’s December policy meeting, where rates were cut by 0.25% with Chair Jerome Powell hinting at another potential cut in 2026, Bitcoin’s price slid. The cryptocurrency posted a weekly loss exceeding 3% and a 24-hour decline of over 2%, trading in a wide range between $89,623 and $94,177 according to CoinGecko data.
More alarmingly, Bitcoin futures on the CME have retested a major trendline after breaking out of a linear downtrend, a move often watched for confirmation by traders. Simultaneously, the 50-day moving average has crossed below the 200-day moving average, forming a ‘death cross’—the first such occurrence on CME futures since 2022. While not infallible, this technical setup is widely monitored as a potential signal of a sustained trend shift or confirmation of underlying weakness.
Market Sentiment Cools as Traders Await Direction
Market activity reflects a pronounced shift toward caution. Analyst CRYPTOWZRD noted that Bitcoin’s daily candle closed without a clear direction, leaving price action trapped in a tight range. For a move higher, Bitcoin needs to break and hold above $94,000, while a drop below $89,250 would signal continued weakness. Until a decisive breakout occurs, traders are staying patient, monitoring for stronger setups on lower time frames.
This hesitancy is mirrored in derivatives markets. Data from analyst Ali shows total open interest in Bitcoin futures has plummeted from $47.5 billion to $27.5 billion in just two months—a drop of roughly 42%. This sharp decline in open interest points to significantly reduced speculative exposure and leverage across the board, underscoring a broader de-risking in the market following Bitcoin’s retreat from its October high of $126,080, a decline of over 28%.
Collectively, the evidence from on-chain metrics, technical analysis, and market structure suggests Bitcoin’s correction may have further to run. The absence of deep, capitulatory losses among short-term holders, combined with bearish technical crossovers and waning futures interest, indicates the market may need to endure more pain before establishing a durable foundation for its next major advance.
📎 Related coverage from: cryptopotato.com