In brief
- Bitcoin’s 1-3 month holders have swung from a +25% profit in May to a -25% loss in December.
- A break above $93,321 would liquidate roughly $570 million in leveraged short positions.
- The 25-delta options skew has risen, showing reduced but persistent demand for downside protection.
A sharp reversal in fortunes for Bitcoin’s newest investors could be laying the groundwork for the next leg higher.
Short-term Bitcoin holders, defined as those holding coins for one to three months, have seen their aggregate profit/loss swing from a +25% gain in mid-May 2025 to a -25% loss as of December.
The dramatic shift indicates a wave of capitulation is underway, with recent buyers being “shaken out” of their positions—a transfer of wealth from weak to strong hands.
It involves the transfer of wealth from weak hands to strong hands.
“During this cycle, these phases have often been associated with the formation of a bottom,” noted CryptoQuant analyst DarkFrost in a Tuesday tweet. He added that once a large portion has capitulated, “that is usually when the opportunity to accumulate becomes interesting.”
“Bitcoin faced a strong rejection at $93,000 last week, but as price attempts to break through this level again today, we’re seeing large short-liquidation clusters forming,” Glassnode noted in a Tuesday analysis.
The firm highlighted that the forced buying from these liquidations can “act as fuel for upside, as forced buyers amplify momentum.”
The market is now approaching a price level that could ignite the recovery, with Bitcoin trading at $93,330 after a 7.4% gain over the past 24 hours, according to CoinGecko data.
The recent bounce has also improved investor sentiment, as seen in the prediction market Myriad, owned by Decrypt’s parent company Dastan, where users have assigned an 80% chance that Bitcoin’s next move takes it to $100,000 rather than $69,000.
A break above $93,321 would liquidate roughly $570 million in short positions built up over the past week, according to CoinGlass data, adding credence to Glassnode’s short-squeeze thesis.
When the price moves against them, short sellers are forced to buy back their positions to limit losses, creating additional buying pressure that can accelerate the ongoing recovery.
Supporting options data shows the market is cautiously positioning for a potential rebound.
The 7-day 25-delta options skew has improved from -10% to -4% between November 30 and December 3, according to Deribit data, indicating a notable reduction in demand for put options or bearish bets. The 30-day skew has seen a similar, though more modest, uptick.
A rise in this metric signals declining demand for downside protection. “This phenomenon signals a rebound,” Adam Chu, chief researcher at options analytics firm GreeksLive, told Decrypt.
“With the Federal Reserve ending quantitative tightening and rising odds of rate cuts, there’s potential for liquidity to flow back into risk assets—and crypto in particular,” Chu noted.
The convergence of these factors paints a clear picture: the painful shakeout of short-term holders has removed a source of overhead selling pressure.
A sustained break above the $93,000 threshold now has the potential to trigger a reflexive rally, as trapped short positions are forced to cover, accelerating Bitcoin’s recovery from its recent lows.
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