Bitcoin has been on a downward trajectory since October, with its price falling below $85,000. While market observers often assume these declines are caused by investors selling their holdings, the data tells a different story. Recent pullbacks are primarily related to short positions opened using stablecoins, with broader market dynamics amplifying this effect.
In Brief
- Bitcoin's recent pullbacks are largely caused by open short positions with stablecoins, creating downward pressure without triggering massive selling by holders.
- Approximately $300 billion of dormant Bitcoin returned to circulation in 2025 via holder sales, OTC transactions, and ETF activity.
Market Mechanics Behind Bitcoin’s Recent Pullbacks
Sweep, co-founder of GlydeGG, explained that leveraged short positions in stablecoins are the main force behind recent declines. When these positions enter the market, market makers must respond by selling Bitcoin to manage their exposure and maintain neutrality. This operational selling does not reflect negative sentiment, but is necessary to balance positions. Therefore, prices can fall without causing widespread panic, hasty selling, or spot selling by long-term holders.
The analyst also described how the US dollar itself plays a role in this cycle, explaining that by moving through the global system it acts as leverage and puts pressure on the market. Traders respond to this pressure by adjusting their positions via hedging, which affects Bitcoin spot prices and keeps the cycle running.
Furthermore, selling remains subdued as most retail investors have already exited, leaving the market operating in a system measured by a weakening currency. This pattern contributes to increasing volatility even when overall investor conviction remains stable, highlighting the market's sensitivity to dollar influence.
According to Sweep, this is less of a traditional bear market and more of a rebalancing of liquidity pools, allowing major players to acquire Bitcoin at lower prices without holding it directly.
Long-term holder activity and supply changes
Further insight comes from Crypto Miners, an ambassador at Wolfswapdotapp, who highlighted research from K33Research showing that approximately $300 billion of previously dormant Bitcoin returned to circulation in 2025. This increase in supply was fueled by long-term holder sales, over-the-counter trading, and absorption by ETFs, representing one of the largest increases in available supply in the network's history.
According to on-chain metrics provided by CryptoQuant, long-term holders are distributing Bitcoin at rates not seen in more than five years, marking one of the most active periods of their recent activity. At the same time, the market is under strong downward pressure which currently weighing on demandintensified by negative ETF flows and reduced participation by retail investors.
However, K33Research suggests that Bitcoin's current distribution phase may be coming to an end, with long-term holders expected to ease their outflows during the first half of next year. This could create a fresh buying opportunity as institutional adjustments stabilize supply.
They declared, “Markets remain sensitive, but structurally, this looks more like a redistribution at the end of the cycle than a panic sell-off.”
Bitcoin Flows and Key ETF Price Levels in Focus
As an extension of these movements, Julio Moreno, head of research at CryptoQuant, pointed out that large Bitcoin flows took place on Binance as the price fell below $85,000. At the same time, Bitcoin has moved closer to the average cost of U.S. spot ETFs, putting many ETF investors close to their initial investment value.
According to Glassnode, this area is particularly important, as future moves will depend on fresh buying entering the market or increasing selling pressure as holders review their positions.
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