According to a recent report from CryptoQuant, Bitcoin has officially entered a capitulation phase following the breach of several significant support levels on the daily chart. The breakdown of these structural supports has notably altered market dynamics, underscoring the prevailing sentiment that Bitcoin has shifted into a bear market.
This analysis reveals a distinct change in market behavior, primarily driven by a weakening price structure, declining investor profitability, and increasing sell-side pressure in both the spot and derivatives markets.
Key Support Levels Breached
CryptoQuant points out that the initial warning sign was Bitcoin“s failure to maintain the $84,000 daily support level. This was followed by a further decline below the $79,541 mark, which confirmed a series of lower lows and ineffective support defenses. The continued loss of support indicates that buyers are struggling to absorb the selling pressure, a typical characteristic of the later stages of market cycles.
Capitulation and Loss Realization
With the structural breakdown established, CryptoQuant describes the current market phase as capitulation, where widespread loss realization among investors is evident. As prices trend downward, profitability metrics for Short-Term Holders (STH) are sharply declining. This group typically holds Bitcoin at higher average entry points, making them particularly susceptible to losses in a declining market.
As these losses accumulate, STHs are increasingly compelled to sell during downturns, further intensifying the downward pressure on prices. This scenario creates a self-perpetuating cycle: falling prices lead to loss realization, which in turn drives more selling.
Market Conditions Shift
A significant observation from the report is the bearish alignment across both spot and futures markets. Previously, demand in the spot market provided a stabilizing influence, preventing more severe declines despite bearish sentiment in derivatives. This support has dissipated, with futures markets maintaining a bearish stance since late 2023. As spot demand fails to counterbalance this pressure, price movements have become increasingly erratic, characterizing a market filled with fear and uncertainty.
On-Chain Metrics Indicate Selling Pressure
Several on-chain metrics corroborate the capitulation narrative. The STH-SOPR (Spent Output Profit Ratio) has dropped significantly below neutral levels, indicating that short-term holders are selling their holdings at a loss—an essential signal of capitulation. Additionally, rising exchange reserves suggest an increased intent to sell, as more Bitcoin is moved from private wallets to exchanges.
UTXO Age Bands reveal escalating pressure across various coin-age groups, indicating that multiple investor segments are approaching cost basis stress levels. The MVRV (Market Value to Realized Value) ratio shows a contraction in unrealized profits, suggesting remaining holders face the dilemma of either securing minimal gains or limiting further losses.
Collectively, these indicators depict a market endeavoring to eliminate excess optimism and speculative leverage.
Implications of Capitulation
CryptoQuant highlights that capitulation phases are cyclical, often lasting until the market finds a new equilibrium. This process typically demands time, not merely price adjustments, as weaker hands exit and the remaining holders adjust their expectations. Although capitulation can herald a potential long-term recovery, it is important to note that stabilization is not immediate; markets often undergo extended volatility and consolidation prior to establishing a reliable foundation.
In summary, as Bitcoin breaches essential daily supports and faces synchronized bearish signals across various metrics, it is clear that the market has entered a capitulation phase. The focus has shifted from potential upside to the necessary structural repairs as the market navigates through fear-driven selling in search of a sustainable equilibrium.
