Bitcoin Experiences Unusual Short-Term Supply Increase, Sparking Bearish Concerns

Bitcoin has been struggling to make significant price gains since the short squeeze in mid-December, facing multiple rejections around the $90,000 mark. Currently, the leading cryptocurrency is consolidating near the $87,000 level as investors await a clearer market direction. According to the anonymous analyst Sunny Mom, recent on-chain analysis indicates that bearish sentiment is likely to persist in the coming months following an extended correction observed in October and November.

Key Takeaways

Bitcoin's price has struggled to rise, currently consolidating around $87,000 after rejection at $90,000.
Analyst Sunny Mom indicates a bearish trend, influenced by increased short-term supply and emotional market reactions.
The current supply dynamics indicate passive holding rather than a new influx of capital.
Demand remains weak due to macroeconomic uncertainties, leading to concerns about potential price drops below $80,000.

Bitcoin

Why Increased Short-Term Bitcoin Supply Indicates a Rare Bearish Signal

In a QuickTake post dated December 27, Sunny Mom highlights the BTC HODL waves, which illustrate a growing share of short-term holders coinciding with declining prices. This shift could suggest a change in market dynamics, flipping a traditionally bullish metric. Historically, when short-term holders (STHs), or those who have held Bitcoin for less than 155 days, increase, it indicates new capital entering the market ahead of sustained price rallies. However, the analyst interprets the current situation as “passive bag-holding” rather than an influx of new investment.

This trend revolves around investors who purchased Bitcoin during the $120,000 rally in October, fueled by fear of missing out (FOMO), as well as dip buyers from November. These holders are now facing unrealized losses, leading to a market setup that impacts behavior. Sunny Mom notes that with every relief rally, selling pressure surfaces as these investors try to exit at break-even prices, effectively transforming the growing STH group into a resistance level rather than providing support. As a result, price recoveries find it difficult to gain momentum.

Bitcoin Source: CryptoQuant

According to the well-regarded analyst, the market is experiencing a notable emotional impact that is evident on-chain. For instance, Net Realized Loss (NRL) spikes have been recorded repeatedly since the liquidations in October, indicating that capitulation is in progress. Investors appear to be locking in losses after enduring months of volatility. Sunny Mom describes this scenario as a “dull knife” cutting deep, illustrating how weaker hands are being forced out—not in a single crash, but through sustained exhaustion.

Volume of Bitcoin Demand Remains Stagnant, With Potential for Drop Below $80,000

Expanding on his analysis, Mom attributes the existing bearish condition to a lack of demand. The market analyst points out that exchange reserves are currently at multi-year lows, which indicates limited sell-side liquidity available in the market. Concurrently, long-term holders (LTHs) seem reluctant to part with their Bitcoin, suggesting that conviction remains strong among these investors.

The underlying issue lies within the demand side. With ongoing macroeconomic uncertainty, prospective new buyers seem hesitant to enter the market, resulting in a vacuum in demand. This scenario has led to thin order books, which means even small amounts of selling pressure can lead to significant price drops.

While some market observers anticipate a possible recovery in the first quarter of 2026—citing expectations for interest rate cuts and an increase in global liquidity—Mom foresees that Bitcoin may undergo a “final shakeout” to rectify the imbalance. This shakeout could lead to a drop below $80,000, acting as a liquidity hunt that might flush out the remaining weaker holders, allowing larger investors to accumulate more Bitcoin.

Bitcoin BTC trading at $87,802 on the daily chart | Source: BTCUSDT chart on Tradingview.com