Big Bitcoin players recover, short-term holders sink

Core Points

Small whales have returned to unprofitable status.

The market value of short-term holders fell below the 2024 low.

Exchange net flow reached a positive value of 5,044 BTC.

Open positions increased, while funding rates turned negative.

Fresh spot demand is still the missing confirmation signal.

The rebound fixes the cost base, not capital formation

The most constructive signal comes from holding wallets of 100 to 1,000 BTC. According to CryptoQuant's analysis of unprofitable whales, this group has returned to profitable status after Bitcoin's recent rebound.
Entering a profitable state means that the market price is higher than the overall cost basis reflected by this indicator. Holders in this group no longer bear the same unrealized losses, thereby reducing a source of pressure that might force them or encourage them to sell when they are weak.

This signal does not indicate that these whales have purchased more bitcoin. It simply suggests that their existing positions have returned to profitability as prices recover-a situation that can happen without significant new capital entering the market, especially when the market starts from depressed prices.
The report pointed out that similar shifts occurred in March and April and subsequently led to short-term gains. Historical comparisons support the possibility of another rebound, but cannot determine its size or duration. The only two recent precedents are too limited to transform this threshold into a reliable periodic signal.

New Bitcoin holders still represent a depressed market

Broader short-term holder data remains quite weak.
According to another analysis of this group by CryptoQuant, the market value of short-term Bitcoin holders fell to US$236.2 billion on July 25. This is only the second time that it has fallen below the level recorded on October 3, 2024, which was the lowest reading of the year.

This decline should not be interpreted as the entry or exit of capital of the same size into or out of Bitcoin. Short-term holder market capitalisation measures the current market value of coins held within the group, and its decline may be caused by several different reasons:
-Lower Bitcoin prices reduce the value of coins already held within the group.
-As previously acquired bitcoins enter the long-term holder category over time, supply leaves the group.
-Newer market participants are acquiring or moving fewer coins.

These mechanisms have different meanings. The shift of currencies to long-term holdings over time reduces supply associated with price-sensitive holders and may strengthen the underlying ownership structure of the market. A contraction caused by weak new demand is less constructive because recent buyers have often provided the new capital needed to sustain the recovery.
The market value data itself cannot distinguish the two, but the loss data points to pressure rather than a calm shift towards long-term holding. Short-term holders posted a loss of approximately $1.75 billion on July 13, approximately $340 million, or 24%, higher than the $1.41 billion recorded on June 2.

As of July 25, the realization of losses has eased, but the market value of short-term holders is still at an abnormally depressed level. Reduced losses mean fewer holders are surrendering with the same intensity. But that does not mean that new demand has arrived to replace them.

More leverage is coming ahead of stronger capital inflows

Current market structures are becoming more reliant on derivatives.
According to CryptoQuant's comprehensive market analysis, the net inflow of 5,044 BTC marked a 91% month-on-day increase, the third-highest single-day figure in the past 31 days.
Positive net flow means that more BTC entered the wallet marked as the exchange than left during the measurement period. This increases the number of bitcoins that may be used for transactions or sales, but it is impossible to confirm that every deposit will be sold. Some BTC may be transferred for collateral, internal portfolio management, or derivative activities. This trend still creates a more unfavorable supply situation than an equal net outflow because the currency is closer to the liquid market.

At the same time, the direction of positions shifted. The funding rate changed from 0.003826 to-0.001371, which was the only negative value during the 31-day period provided. Negative funding rates indicate that short positions dominate perpetual contracts, and short traders pay fees to the party holding the opposite position.

Open interest rose 0.69% to approximately $22.5 billion, 4.59% above its 30-day average. More derivatives exposure is increasing and the market is leaning towards bearish, increasing the size of leveraged positions that could face liquidation in either direction. Further declines could validate these short positions and add pressure. Unexpected price increases could force traders to close positions, accelerating short squeeze.

The realized market value exposed the weakness behind the rebound.

The realized market value of Bitcoin fell for three consecutive days to approximately US$1.061 trillion.
Unlike ordinary market value, which values circulating supply at the latest market price, the realized market value values each coin at the price it last moved. It is often used as an estimate of the value of storage within the network based on on-chain costs.

A three-day small decline does not constitute a large-scale capital outflow. When coins acquired at higher prices move at lower prices, the realized market value may decline, replacing the more expensive cost base with a cheaper cost base. When BTC changes hands at a price higher than its previously recorded value, the realized market value may rise.
Direction still matters. A sustained recovery requires new deals to occur at stronger valuations, capital to remain within the network, and demand to absorb any additional exchange supply. Recent declines suggest that none of these conditions has emerged.

Short squeeze does not confirm a durable recovery

The clearest short-term catalyst exists in derivatives data, not in the spot market.
If negative funding rates persist and prices refuse to fall, Bitcoin could rise significantly. Traders holding short positions will face increasing pressure as the market moves against them, and forced liquidations could add buying demand to a rebound.
A decline in open interest during periods of price rise will support this interpretation, suggesting that positions are being closed as Bitcoin rises, consistent with signs of widespread expansion of short covering rather than risk-taking. This will still leave unresolved sources of market activity, as liquidation-driven demand disappears once fragile positions are cleared.

A more lasting recovery requires confirmation from spot and on-chain data. Net exchange flows need to turn negative, or at least fall back from current inflow levels, indicating that immediately available supply is no longer increasing. The realized market value needs to stabilize and start expanding again, indicating that the network's record capital base is growing again.
The market value of short-term holders also needs to be restored, but this signal needs to be interpreted in conjunction with other signals. Higher bitcoin prices can increase this indicator, but cannot prove a large number of new buyers entering. The growth accompanying the expansion in market value that has been achieved will be even more significant.

Failure to attract demand will put the whale into a loss again

A bearish scenario does not depend on the immediate conversion of exchange deposits into a market sell-off.
If net flow remains positive and Bitcoin fails to rise, especially if open interest continues to rise, pressure will build. This suggests that the market is absorbing more potentially tradable supply, while leverage exposure is growing.
Further declines in realized market values will strengthen the conclusion that the rebound has not attracted new capital into the network. Another increase in short-term holder losses will indicate that buyers are returning to voluntary surrender in the near term, rather than just remaining underwater.

Whale signals provide a clear point of failure. If the unrealized earnings ratio of wallets holding 100 to 1,000 BTC falls below zero again, this group's brief recovery will fail, thereby restoring the pressure of a rebound to temporarily remove.

Bitcoin is somewhere between an improving cost base signal and a weak traffic structure. The latest data does not confirm a broad recovery, but does not support viewing the market as an all-round bearish. Before market value expansion has been achieved and exchange traffic has improved, this rebound should be understood as having squeeze potential but lacking demand confirmation.