Interpreting the ever-changing rhythm of the Bitcoin market

Author: Tanay Ved, Source: Coin Metrics, Translation: Shaw Golden Finance

Key Takeaways

• Bitcoin supply is circulating, with long-term holders gradually distributing, and new participants steadily absorbing supply, indicating a smoother transfer of ownership.
• Since early 2024, spot Bitcoin ETFs and Strategy DATs have absorbed approximately 57% of the short-term holder supply growth, currently accounting for nearly a quarter of all active Bitcoin over the past year.
• Realized volatility has continued to stabilize, signaling a more mature market structure characterized by strong institutional demand and extended cycle durations.

Introduction

After reaching a historic high earlier this year, Bitcoin has been in consolidation, with prices briefly falling below $100,000 for the first time since June. Macroeconomic headwinds, a weak stock market, and one of the largest liquidation events in crypto history have dampened market sentiment, slowed capital inflows, and raised doubts about the sustainability of the bull run. Additionally, there is growing concern that large whales or “OG whales” might transfer or sell early-held Bitcoin, adding pressure to Bitcoin and the broader crypto market. Following recent declines, the total market capitalization of cryptocurrencies is now close to $3.6 trillion.

Beneath the surface, on-chain Bitcoin data provides important context. In this week’s Coin Metrics Network State Report, we explore changes in holder behavior and how key demand drivers influence market sentiment and define the rhythm of this cycle. By analyzing shifts in active supply and demand channels, we examine whether recent price fluctuations reflect profit-taking at cycle’s end or deeper structural changes in Bitcoin ownership fundamentals.

Supply Distribution Meets Institutional Absorption

Active Supply

First, let’s look at the active supply of Bitcoin, which reflects the degree of activity based on holding periods, categorized by the duration since the last on-chain transaction. This helps us understand the distribution of Bitcoin between inactive (dormant) holdings and more recently traded segments (also known as “HODL Waves”).

Next, we isolate the portion of Bitcoin supply that has not changed hands for over a year, serving as an indicator of long-term holder (LTH) supply. Historically, during bear markets, as Bitcoin consolidates among long-term holders, this indicator rises; during bull markets, as these holders begin to transfer Bitcoin, realize gains, and diversify, it declines.

Data Source: Coin Metrics Network Data Pro

Today, approximately 52% of the circulating supply of 19.94 million BTC has been idle for over a year, down from about 61% at the start of 2024. The sharp increases during the bear market and sharp declines during the bull market have notably eased, with gradual distributions occurring in Q1 and Q3 of 2024 and recently into 2025. This indicates that long-term holders are distributing Bitcoin in a more sustained manner, reflecting a longer-term transfer of ownership.

ETFs and DATs as Demand Drivers

Conversely, since 2024, the supply of short-term holders (Bitcoin active within the past year) has steadily increased, as dormant Bitcoin re-enters circulation. This aligns with the launch of spot Bitcoin ETFs and the acceleration of digital asset treasury (DAT) reserves, both introducing new, persistent demand channels that absorb the redistributed supply.

As of November 2025, the number of active Bitcoin over the past year is 7.83 million, up about 34% from 5.86 million at the start of 2024, mainly due to the re-entry of previously dormant Bitcoin. During the same period, the reserves of spot Bitcoin ETFs and Strategy holdings increased from approximately 600,000 to 1.9 million BTC, absorbing nearly 57% of the net growth in short-term supply. Currently, these tools account for about 23% of all short-term holder supply.

Although recent weeks have seen a slowdown in capital inflows, the overall trend reflects supply gradually shifting into more stable, long-term holding channels—a distinctive feature of this cycle’s market structure.

Data Sources: Coin Metrics Network Data Pro and Bitbo Treasuries (Note: ETF supply excludes Fidelity’s FBTC; DAT supply includes Strategy)

Behavior of Short-term and Long-term Holders

The trend of realized profits reinforces the moderation observed in Bitcoin’s supply dynamics. The Spent Output Profit Ratio (SOPR), which measures whether holders are spending Bitcoin at a profit or loss, offers insight into the behavior of different holder groups throughout market cycles.

In previous cycles, SOPR values for long-term and short-term holders often exhibited sharp, synchronized swings. Recently, this relationship has begun to diverge. Long-term holders’ SOPR remains slightly above 1, indicating they are continuously realizing profits and modestly selling into strength.

Data Source: Coin Metrics Network Data Pro

Short-term holders’ SOPR has hovered near the breakeven point, partly explaining recent cautious market sentiment, as many short-term holders’ cost basis is close to current prices. The divergence between groups reflects a market in a more tempered phase, with institutional demand absorbing redistributed supply rather than experiencing rapid boom-and-bust cycles. If short-term SOPR can sustain above 1, it could signal strengthening market momentum.

While broader corrections may compress profits across groups, the overall trend suggests supply turnover and profit realization will gradually unfold, creating a more balanced structure and extending cycle durations.

Diminishing Bitcoin Volatility

This structural moderation is also reflected in Bitcoin’s volatility, which has continued to decline over time. Realized volatility over 30, 60, 180, and 360 days has stabilized around 45-50%, far below the periods of intense volatility that drove boom-and-bust cycles. Today, Bitcoin’s volatility is increasingly comparable to large-cap tech stocks, indicating a maturing asset class. This reflects improved liquidity and a stronger institutional investor base.

For asset allocators, this reduced volatility may enhance Bitcoin’s appeal within diversified portfolios, especially given the still-uncertain correlations with equities and gold.

Data Source: Coin Metrics Market Data Pro

Conclusion

On-chain Bitcoin trends suggest this cycle is unfolding in a more moderate, enduring manner, without the frenzied surges typical of previous bull markets. Supply distribution is wave-like, primarily absorbed by more persistent demand channels such as ETFs, DATs, and broader institutional holdings. This shift indicates a maturing market structure, with declining volatility and circulation speed, and extended cycle durations.

Nonetheless, market momentum still depends on sustained demand. ETF capital inflows are slowing, some DATs face pressure, recent liquidations have occurred, and short-term SOPR remains near breakeven—all signs of a market in rebalancing. The increasing supply of long-term holders (over a year inactive), SOPR rising above 1, and new inflows into spot ETFs and stablecoins could be key signals for a strong market resurgence.

Looking ahead, macroeconomic uncertainty easing, liquidity improving, and regulatory progress in market infrastructure could accelerate capital inflows and prolong the bull market. Despite some cooling in market sentiment, the market remains relatively healthy after recent deleveraging, supported by growth in institutional channels and on-chain infrastructure adoption.