Author: Ashrith Rao
Compiled by: Luffy, Foresight News
Since hitting its all-time high of $126,000 in October 2025, Bitcoin has experienced a cumulative decline of 50% and is currently trading around $63,000.
Three recent on-chain data reports have been released successively, revealing that this round of decline differs fundamentally in structural terms from previous bear market corrections—this goes far beyond what a simple price chart can illustrate.
Capital Efficiency Problem Has Become a Long-term Reality, Difficult to Reverse Short-term
On July 1st, CryptoQuant CEO Ki Young Ju released an in-depth report, providing a complete review of Bitcoin's capital-pulling efficiency across cycles, which upends the market's belief that "Bitcoin still has tenfold upside potential." The research compares the scale of capital required for the same price appreciation in each bull market, revealing an extremely wide disparity:
- In 2011, a mere $2.7 billion in net inflow fueled an astonishing 55,436% surge;
- From the 2018 to 2021 cycle, $36.5 billion in incremental capital drove approximately a 2,000% increase;
- In this current cycle, a substantial $69.7 billion increase in realized market cap has only yielded a 689% gain.
In 2011, just $5 million in new capital could double the price; today, achieving the same doubling effect is projected to require $101 billion in incremental inflow. This is no small matter, and we must re-evaluate Bitcoin's growth logic. While millions could move the market in the early days, it now relies on hundreds of billions in institutional capital to drive trending market moves.
Ki Young Ju's calculation leads to a stark conclusion: for Bitcoin to embark on another parabolic main upswing, at least $1 trillion in fresh capital must enter. This means Bitcoin can no longer rely solely on retail ETF dribs and drabs for hype; it must become a core component of global asset allocation.
Compared to gold's $27 trillion total market capitalization, Bitcoin's current $1.3 trillion market cap suggests ample theoretical growth space. However, the significant decline in capital efficiency has led to a much slower pace of appreciation in this cycle compared to the 2017 and 2021 bull markets, making it increasingly difficult to replicate past hundred-fold or ten-fold gains.
Even if future capital inflows reach record highs, data patterns suggest that the percentage gains in subsequent bull markets will be significantly lower than in previous cycles. The latest calculations from CryptoQuant have already proven that Bitcoin is unlikely to replicate the exaggerated gains seen in 2017.
Continuous Drying Up of Circulating Supply, a Double-Edged Sword
The structural change on Bitcoin's supply side may have an even greater impact on the current market than the capital efficiency logic. A June 15th report from K33 Research shows that long-term holder ownership as a percentage of circulating supply has reached a record high of 79%.
Furthermore, as of June 6th, only 218,421 bitcoins dormant for over two years changed hands on-chain, the lowest level for that date since 2012, when only 70,600 sleeping bitcoins moved on the same date. In contrast, during the distribution phase in June 2024, 1.18 million bitcoins were transferred out of cold wallets for sale.
Data from on-chain tracker Alphractal also corroborates this trend: the share held by long-term holders has increased from 74% in the last cycle to 78% currently; in recent months, approximately 830,000 bitcoins have moved from short-term trading wallets into long-term dormant addresses.
K33 analyst Vetle Lunde stated that highly concentrated holdings, minimal movement of dormant coins, and continuously shrinking volume are not signs of new selling pressure emerging, but rather typical market characteristics of the later stages of a Bitcoin bear market. The logic is straightforward: with over 80% of Bitcoin locked up long-term, the market's available floating supply has shrunk considerably. With thinner order book depth, incremental buying pressure—whether from institutions, retail, or ETFs—can more easily trigger rapid price fluctuations.
Looking solely at the liquidity structure, market sentiment appears optimistic, but this does not determine whether incremental capital will enter as anticipated.
Multiple institutions including Bitfinex, Wintermute, and Glassnode have repeatedly emphasized that ETF inflows, stablecoin scale expansion, and the fervor of institutional adoption have not reached levels sufficient to support a long-term reversal. While tightening supply is an important condition for bottoming, scarcity of coins alone is insufficient to confirm a market bottom.
CoinDesk data from late June shows that the total holdings of long-term holders in unrealized loss reached 5.58 million coins, the second-highest in history, second only to the March 2020 crash. Interestingly, even as many long-term holders face deep losses, the share of long-term holdings continues to rise, indicating the simultaneous presence of both steadfast conviction and painful capitulation in the market.
Profit/Loss Indicator Signal: Fourth Time Reaching Extreme Bottom Zone Since 2022
On July 3rd, CryptoQuant released several on-chain metrics, with the Realized Profit/Loss Ratio being the most critical.
Bitcoin's overall Realized Profit/Loss Ratio has dropped to -0.35, hitting a 43-month low, comparable to the deep bear market following the FTX collapse in 2022, when prices fell below $16,000.
Historical data shows that after this indicator falls below -0.35, both the 2015 and 2019 bear markets witnessed large-scale reversal bull runs. This metric statistically maps the distribution of realized profits and losses across the network's coins, directly reflecting the market's overall state of comprehensive loss. A negative value indicates that massive stop-loss selling pressure has been sufficiently released, rather than signaling impending downside risk.
Interpreting this within the market context, Bitcoin briefly touched a low of $57,950 on July 1st, marking a 652-day low; it then rebounded 7% and is currently oscillating in the $61,000–$63,000 range. Swan Bitcoin analyst Adam Livingston points out that the current price is only 16% above the network's realized price; historically, such a price difference has been followed by an average gain of 41% over six months and 81% over one year.
Bitwise CIO Matt Hougan recently commented on the MicroStrategy STR Convertible Preferred Note redemption turmoil: in June, the notes fell below their $100 face value, hitting a low of $75, leading the market to question the long-term sustainability of Michael Saylor's business model of issuing equity to hoard Bitcoin and pay dividends. However, Hougan believes that this risk clearing event actually helped the market flush out many fragile speculative positions and is not a precursor to a new round of systemic risk.
The market is currently repeatedly testing a critical support level. Bitcoin has tested the $60,000 level four times this year and held support each time; whenever concentrated selling pressure is released, centralized exchanges consistently see daily net inflows of about 50,000 BTC, reflecting the gradual exhaustion of selling pressure rather than active, large-scale capitulation. From a daily and weekly candlestick pattern perspective, the market appears to be forming a W-bottom reversal structure.
Analyst John Bollinger notes that the current price is retesting the lower Bollinger Band, with small fractal bottoming patterns emerging within the larger timeframe. If the $60,000 support level is decisively broken, the next critical support zone lies around the $53,000 realized price level, which is also the core bottoming zone that bargain-hunting capital must defend.
Macro Environment Suppresses Market
All on-chain changes in supply and capital flow are set against a bearish macroeconomic backdrop. June saw the worst monthly performance for U.S. spot Bitcoin ETFs since their launch, with BlackRock's IBIT leading industry-wide outflows. The entire market experienced net outflows exceeding $4.5 billion. K33 data shows the pace of outflows has slowed but capital has not shifted to net inflows.
The Federal Reserve chair transition brings significant policy uncertainty, with the market repricing expectations for policies under the potential leadership of Kevin Warsh. Interest rate trajectories have always been a core variable affecting Bitcoin's short-term price action. Disappointing U.S. June jobs data, with only 57,000 jobs added—far below market expectations of over 100,000—slightly increased market expectations for rate cuts.
Institutional infrastructure in Europe is gradually improving. Germany's DZ Bank, complying with the EU's MiCA regulation, has launched Bitcoin trading and custody services. Deka Bank also plans to roll out similar products across Germany's 340 savings banks. Institutional infrastructure is developing slowly but steadily on the periphery.
However, this is more of a demand-driven factor rather than a catalyst for capital flows.
Conclusion
Synthesizing all signals, if future economic growth materializes, the institutional capital required to achieve percentage gains comparable to past cycles will far exceed that of previous cycles, due to declining capital efficiency.
The market's available floating supply for absorbing this capital has significantly shrunk, as long-term holder concentration reaches historic highs.
Large-scale stop-loss selling pressure has largely been exhausted, as evidenced by profit/loss indicators hitting 43-month lows.
While any single data point only reflects a partial market feature, combining all indicators reveals that the market already possesses the complete conditions for bottoming. However, the decisive variable—massive institutional incremental capital—has yet to materialize.
