Bitcoin's Rally Attempts Repeatedly Stalled by Investor Distribution Wave

Bitcoin continues to struggle with sustained upside momentum as investors holding underwater positions maintain steady selling pressure. Current price action near $87,720 reflects a market caught between competing forces—optimistic derivatives positioning and relentless spot selling from loss-sensitive holders.

The Anatomy of Recent Price Rejection

On Wednesday’s session, Bitcoin initially gained traction, climbing from opening levels near $86,300 to breach $90,200—a move representing approximately 4.6% upside within hours. Yet this rally proved short-lived, as the entire gain evaporated within minutes. The cryptocurrency retreated to trade near $86,600, essentially flat for the day. This pattern of sharp reversals isn’t random; it reflects structural market dynamics unique to low-liquidity holiday environments.

Holiday trading periods fundamentally alter market microstructure. Reduced participation from institutional traders and thinner order books amplify both volatility and the speed of reversals. The technical consequence: quick rallies attract leveraged buyers whose rapid liquidations accelerate downturns.

Supply Distribution Blocks Meaningful Rallies

Glassnode’s analysis points to a critical obstacle for Bitcoin bulls: “the dense supply accumulated between $93,000 and $120,000.” This range represents where numerous current holders accumulated positions—and it’s where many now face difficult decisions. At current prices, holders in this band sit on losses and appear to prioritize exiting near breakeven rather than averaging down.

The mechanics are straightforward: each time Bitcoin approaches these resistance levels, supply overwhelms buying interest. Breakeven sellers emerge, turning potential breakouts into rejection points. Without clearing this supply zone through sustained demand, rallies remain capped.

Support Levels Under Scrutiny

Bitcoin has found a floor around $81,500, representing the true mean investor cost basis across all actively held coins. This level has proven meaningful, preventing deeper declines and serving as a psychological anchor. However, whether this support can withstand continued distribution from frustrated holders remains questionable. As underwater investors grow impatient with year-end tax considerations, this floor could prove temporary.

Breaking above $95,000 and ultimately reclaiming the $101,500 short-term holder breakeven represents the minimum requirement for rallies to feel “meaningful,” according to analysts. Until then, bounces should be viewed as relief patterns rather than directional reversals.

Derivative vs. Spot Divergence

The Wednesday bounce illustrated a critical market disconnect: derivatives traders provided buying pressure evident in rising open interest and positive perpetual flows, yet spot market sellers overwhelmed this enthusiasm. This divergence—bullish futures momentum colliding with bearish spot selling—creates the whipsaw conditions currently defining Bitcoin price action.

Spot market weakness signals a fundamental lack of organic demand. When retail and institutional spot buyers step aside during low-liquidity holidays, derivative-driven rallies become unsustainable.

Limited Catalysts Before Year-End

Ryan Yoon of Tiger Research suggests that significant rallies remain unlikely through 2025 given prevailing bearish sentiment. However, this assessment includes an important caveat: favorable CPI data could trigger short-term relief by signaling potential monetary easing and reduced inflation pressures.

The reality is that Bitcoin faces competing narratives. Macro uncertainty and position adjustment dominate current trading, while positive inflation readings represent the primary near-term catalyst for mean reversion higher.

What Comes Next

Bitcoin remains trapped in a technical and sentiment squeeze. Loss holders control the near-term narrative through consistent distribution, while reduced holiday liquidity ensures that rallies remain fragile and short-lived. Until either massive organic demand emerges or the underwater supply zone clears, expect choppy, range-bound price action through the year’s final weeks.