Bitcoin – Explaining why BTC’s price drop isn’t what it seems

Key Takeaways

How severe was Bitcoin’s latest drop?

Despite the sell-off, 90% of the BTC supply remained in profit, showing limited panic or forced exits.

What triggered the correction?

Excess leverage caused $132 million in short liquidations, but long-term holders stayed composed, keeping BTC’s base stable.

Bitcoin’s [BTC] latest sell-off looked steep, yet it did not mirror the panic collapses seen in 2022’s Luna or FTX crashes. The evidence points to a leverage reset, not a crisis of confidence.

Over 90% of BTC’s supply is still in profit

Glassnode’s data showed that over 90% of Bitcoin’s circulating supply remained in profit despite the recent decline. That divergence indicated most realized losses came from overexposed traders and top buyers, rather than long-term holders.

That is a critical distinction, as it suggests that the correction was structural rather than emotional.

Source: Glassnode

No sign of 2022-style capitulation

During the Luna and FTX collapses, the Percent Supply in Profit metric fell below 65%, marking panic-driven capitulation phases. Those were textbook capitulations — moments when everyone rushed for the exits.

This time, the setup was completely different.

The recent decline wasn’t fueled by fear or spot holders selling under pressure. Instead, it stemmed from excessive leverage in the derivatives market, which eventually had to unwind.

As the market moved against overexposed traders, their forced liquidations triggered a rapid, mechanical chain reaction – sharp and sudden, but not emotionally driven.

Source: X

Leverage unwound, not confidence

CryptoQuant’s Short Liquidations data revealed that around $132 million worth of shorts were liquidated near the $112,000 price zone. That cascade wiped out over-leveraged traders and dragged prices lower, but it also helped reset the market structure.

The short-squeeze was a clear sign that the market flushed out excess leverage and set a cleaner base for the next phase.

Source: CryptoQuant

Bitcoin long-term holders stayed composed

In past capitulations, long-term wallets sent BTC to exchanges — a classic panic signal.

This time, the Long-Term Holder Supply stayed steady, while the Short-Term Holder Supply rose, showing newer traders led the selling.

That is a sign of growing maturity in the market. Long-term investors did not flinch, and that steadiness helps prevent deeper collapses.

Source: CryptoQuant

Bitcoin’s valuation remains balanced

At press time, Bitcoin’s MVRV Z-Score sat at 2.15, suggesting that BTC was neither overvalued nor deeply discounted.

Historically, readings below 1.0 signal major bottoms, while above 6.0 mark euphoric tops.

Source: CoinGlass

Taken together, the data show this correction was a healthy reset. Leverage unwound, conviction stayed strong, and Bitcoin’s structure looks ready for the next accumulation cycle.