Bitcoin Stuck in Consolidation Zone as Underwater Investors Drive Distribution

Bitcoin’s recovery attempts continue to face headwinds from a persistent flood of selling originating from traders nursing significant losses. On Wednesday, BTC launched a rally from around $86,300, briefly touching $90,200 before rapidly retreating—erasing a near 4.6% intraday gain and leaving bulls disappointed ahead of year-end. Current price action near $86,600 reflects a stalemate between bullish positioning in derivatives markets and aggressive spot selling, a dynamic that characterizes the thin-liquidity environment typical of holiday trading.

The Loss-Holder Problem: When Breakeven Becomes Resistance

The fundamental issue blocking sustained upside momentum stems from holders sitting underwater. According to Glassnode analytics, a dense cluster of supply exists between $93,000 and $120,000—representing entry points where current owners are either looking to exit near breakeven or minimize realized losses. This psychological price zone transforms into a ceiling whenever Bitcoin approaches it, as capitulation selling intensifies.

The immediate technical picture shows BTC finding support at $81,500, which approximates the true mean acquisition price of actively held Bitcoin. However, this level’s durability remains questionable given the ongoing distribution pattern. For a meaningful rally to materialize, analysts suggest Bitcoin would need to decisively break through $95,000 and ultimately reclaim $101,500—the short-term holder breakeven threshold—to signal genuine buying conviction.

Derivatives Fueling False Breakouts, Spot Sales Confirming Weakness

Wednesday’s failed rally illustrates a crucial market microstructure problem: rising open interest and positive perpetual futures flows created the initial pop, but the reversal came almost entirely from spot market selling. This disconnect reveals a lack of organic, sustained demand from real market participants. Long-dated futures traders may be chasing momentum, but actual coin holders are liquidating rather than accumulating at these levels.

The perpetual futures market appears disconnected from underlying cash market sentiment, a concerning divergence that often precedes sharper reversals. When leverage-driven rallies consistently fail to hold, it signals weak fundamental conviction among spot-market participants.

Holiday Liquidity Crunch Amplifies Volatility

Entering the year-end period, Bitcoin operates within a structural disadvantage: reduced market depth allows smaller order flows to trigger outsized price swings. The rapid 4.6% flash rally that evaporated within minutes is a textbook example of low-liquidity market behavior. Without substantial bid-side interest, any momentum can reverse violently.

This thin-liquidity backdrop means price discovery becomes distorted, and technical levels that should hold can crumble on minimal selling pressure. Traders should expect continued choppy, directionless price action through early January.

What Could Break the Deadlock?

Ryan Yoon, senior analyst at Tiger Research, argues that “a meaningful upside breakout for Bitcoin appears unlikely before 2025 concludes under prevailing bearish sentiment.” However, he notes one potential catalyst: favorable CPI data could trigger a short-term relief rally if markets pivot toward inflation-easing expectations, potentially providing brief refuge from the selling pressure.

For now, Bitcoin remains caught between defensive derivatives positioning attempting to generate quick profits and methodical spot selling from holders seeking to reduce or recover losses. Until the loss-holder supply zone is absorbed or market sentiment shifts fundamentally, expect BTC to trade defensively within its established range, with continued tests of lower support more likely than explosive breakout attempts.