Crypto holders: why this Bitcoin pullback may be a classic bottom signal

Bitcoin has slipped back toward the low $60,000s, spot ETFs are bleeding capital, and headlines are turning bearish again. For many crypto holders, it feels like the market is breaking down. But when you dig into the data, this environment looks a lot like previous Bitcoin bottoming phases rather than the end of the story.

Spot Bitcoin ETFs are seeing heavy outflows

Spot Bitcoin ETFs, which were a major driver of the rally earlier in the year, are now in a clear outflow streak. Over the last 13 trading days, these products have seen roughly $4.4 billion in net redemptions. Zoom out a bit further and 17 of the last 19 trading days have been negative, with total outflows close to $5.6 billion.

That means a lot of institutional and retail investors who accessed Bitcoin through ETFs are taking money off the table. While this looks bearish in the short term, it’s important to understand who is selling and why.

Who is actually selling Bitcoin?

Research from a major brokerage points to one main group: investors who bought Bitcoin in the last year to year and a half. Analysts track the average cost basis of ETF and ETP holders, which currently sits around $83,000 per BTC. They also track the average cost basis for active Bitcoin investors more broadly (excluding miner rewards), which is around $78,000.

In other words, a large cohort of newer buyers came in at higher prices, watched Bitcoin rally quickly toward roughly $120,000+, and then saw that value cut in half. Many of those late entrants are now underwater and are choosing to sell into weakness rather than hold through the volatility.

More than half of BTC is now at an unrealized loss

On-chain data shows that over 50% of all Bitcoin in circulation is currently held at an unrealized loss. If those holders sold today, they would lock in a negative return. Historically, this has been a powerful signal.

Every major Bitcoin bear market bottom has coincided with a similar setup: a majority of coins sitting at a loss, exhausted sellers, and a market that feels washed out. We saw this in the 2018–2019 bear market, the COVID crash in 2020, and again in the 2022 lows.

The logic is simple. If you’ve held long enough to be deeply underwater, you’re less likely to capitulate at the bottom. Once most weak hands are out and remaining holders are unwilling to sell at a loss, selling pressure dries up. That’s how durable bottoms tend to form.

The role of the 200-week moving average

Another long-term metric that keeps showing up across cycles is the 200-week moving average (200W MA). This line represents Bitcoin’s average price over roughly four years and acts as a kind of “mean” that price tends to revert to during bear markets.

Across all past Bitcoin bear markets, price has eventually fallen back to touch or hover around the 200-week moving average before consolidating and starting a new uptrend. When Bitcoin gets overhyped and stretched far above this long-term trend, it eventually cools off and reverts toward that mean.

In the last cycle, Bitcoin did something it had never done before: it spent an extended period significantly below the 200W MA during the FTX collapse in 2022. That was an extreme event driven by the failure of one of the largest crypto exchanges. Without a similar systemic shock today, a deep and prolonged break far below the 200W MA may be less likely, though not impossible.

Is Bitcoin really “backed by nothing”?

One common criticism is that Bitcoin has no underlying value. A different way to look at it is through the lens of production cost. Mining Bitcoin requires real-world resources: energy, hardware, and infrastructure. Those inputs create a kind of economic floor over time.

For the most efficient miners with access to cheap power and modern ASIC hardware, the current estimated cost to produce one Bitcoin is around $60,000. Historically, in deep bear markets, the aggregate cost of production for top miners has often acted as a rough bottom area. In classic price theory, a product tends to trade at a premium to what it costs to produce, especially over the long term.

That said, the cost of production is not a fixed number. It changes with energy prices, hardware upgrades, difficulty adjustments, and which miners you include in the calculation. It’s a useful reference point, not a guaranteed floor.

Why this looks like a typical Bitcoin cycle

When you combine these signals, the current environment looks very familiar:

• ETF and newer investors are selling after buying high and seeing sharp drawdowns.
• More than half of the supply is at an unrealized loss, a classic bottom indicator.
• Price is gravitating toward long-term metrics like the 200-week moving average and miner production costs.

This is the phase where speculation gets flushed out, “paper hands” exit, and long-term holders (often called “diamond hands”) gradually increase their positions at lower prices. Their goal is to bring down their average cost basis ahead of the next major uptrend.

The bigger macro and crypto trends haven’t gone away

While prices are correcting, the core long-term drivers for Bitcoin and crypto remain in place:

• Monetary policy and debasement: Governments and central banks continue to print money and run loose fiscal policies over time, which keeps the narrative of scarce digital assets alive.

• Regulation and clarity: New laws and frameworks (such as tokenization initiatives and clarity-focused legislation) are slowly giving institutions more confidence to participate in the space.

• Infrastructure growth: Mining operations, custody solutions, and capital markets around Bitcoin are far more mature than in past cycles, even if prices are temporarily down.

Short-term, attention may be elsewhere—AI, space tech, or other hot sectors—but market cycles rotate. Crypto tends to come back into focus once the next narrative or macro shift hits.

What this means for long-term holders

None of this is a guarantee about where price will go next. Bitcoin could still dip into the high $50,000s or even lower if macro conditions worsen or another shock hits the market. However, from a historical and on-chain perspective, current conditions look more like a late-stage bear or early accumulation phase than a terminal decline.

For patient investors, these quieter, fearful periods have often been where the best long-term entries appear. When most people are bored, apathetic, or scared out of the market, disciplined accumulation has historically paid off—provided your thesis on Bitcoin and crypto’s long-term role hasn’t changed.

As always, do your own research, size positions responsibly, and be prepared for volatility. But if history is any guide, the combination of heavy ETF outflows, widespread unrealized losses, and proximity to long-term cost and trend metrics may be signaling that this “not good” moment is exactly where many past Bitcoin bottoms have quietly formed.