Bitcoin’s ‘True Top’ May Be In: 2021 Cycle Déjà Vu Warns Analyst

Long-term Bitcoin holders (LTHs) are currently engaging in their third distribution phase of the current cycle, a behavior that historically plays a decisive role in shaping market trajectories. According to Michael Nadeau, founder of The DeFi Report, this cohort reduced their BTC supply by 12.4% in the first quarter of 2025, mirroring the 13.5% distribution that preceded what many consider the ‘true’ cycle top in April 2021. These coins were transferred to short-term holders (STHs), injecting liquidity into the market but also setting the stage for a potential dual-top structure reminiscent of the 2021 cycle.

In the 2021 cycle, LTHs began their main distribution between November 2020 and March 2021, trimming their holdings significantly just before Bitcoin’s April peak. However, they soon re-accumulated, finishing the year with larger positions than they started with. This re-accumulation explains why the second top in November 2021 was relatively muted, lacking the influx of new capital and being fueled largely by repositioning of existing holdings. The same structure appears to be unfolding now, with LTHs already showing signs of re-accumulation post-distribution.

Despite the similarities to previous cycles, a critical divergence emerges in the participation of short-term holders and the inflow of new capital. Unlike earlier cycles, STH engagement remains subdued, and there is minimal evidence of new money entering the market. Nadeau emphasizes that this muted demand could cap the strength of future rallies, leading to a structure where LTH behavior and holder transitions—rather than broad capital inflows—dictate late-cycle price action.

Glassnode’s data corroborates this outlook, highlighting lingering fragility beneath surface-level recovery signs. While spot market momentum has pushed RSI into overbought territory, conviction appears shallow due to flat volumes and weakening Cumulative Volume Delta (CVD), indicating that sellers continue to press into strength. This underlying weakness leaves Bitcoin vulnerable if fresh demand fails to materialize, increasing the risk of sharp corrections should volatility resurge.

Futures markets reflect high activity, with open interest and aggressive buy-side flows driving perpetual CVD higher. However, softer funding rates highlight reduced long demand and a more cautious outlook among traders. This caution is echoed in options markets, where open interest has climbed but volatility spreads have narrowed and skew has dropped sharply—signs of reduced hedging and greater complacency that heighten vulnerability to sudden market moves.

On-chain signals present a mixed picture. BTC addresses are trending toward cycle lows, while transfer volumes have risen, suggesting capital inflows without broader user growth. Declining fees reflect weak block space demand and muted speculative pressure. Although profitability metrics are improving and investors are broadly in profit, increasing profit-taking hints at potential demand exhaustion. These factors collectively paint a portrait of a market at a critical juncture, where the absence of new capital could define the cycle’s culmination.

The convergence of these indicators—LTH distribution patterns, subdued STH participation, cautious futures activity, and complacent options markets—suggests that Bitcoin may be replaying the 2021 cycle with eerie precision. For investors, the key takeaway is vigilance: while re-accumulation by long-term holders may support prices in the near term, the lack of new money and underlying fragility could ultimately lead to a muted second peak or heightened volatility ahead.