Investment is increasing, but the market's growth is becoming increasingly limited.

Written by: Ashrith Rao

Translated by: Luffy, Foresight News

Since Bitcoin reached an all-time high of $126,000 in October 2025, it has experienced a cumulative decline of 50%, and its current price is around $63,000.

Recently, three on-chain data reports have been released, revealing essential structural differences between the current downturn and previous bear market corrections, which cannot be summarized by a simple price chart.

The challenge of capital efficiency has become a long-term reality, difficult to reverse in the short term

On July 1, CryptoQuant CEO Ki Young Ju published an in-depth report analyzing the capital pull efficiency of Bitcoin cycles, overturning the market's perception that "Bitcoin still has tenfold potential for increase." The research compares the capital scale required for equivalent price increases in different bull markets, showing an extremely disparate gap:

• In 2011, only $2.7 billion net inflow led to an astonishing increase of 55,436%;
• In the 2018 to 2021 cycle, $36.5 billion in increased capital drove about a 2000% increase;
• In the current cycle, a total of $69.7 billion in market value has been realized, resulting in only a 689% increase.

In 2011, only $5 million in new funds was needed to double the price; now, achieving the same doubling is estimated to require an influx of $101 billion. This is not a small matter; we must reevaluate the growth logic of Bitcoin. In the early years, millions of dollars could spur the market, but now it can only rely on hundreds of billions of institutional funds to drive the market into a trending state.

Ki Young Ju's calculations have a stark conclusion: for Bitcoin to again achieve a linear ascending wave, at least $1 trillion in incremental funds are needed. This means Bitcoin can no longer rely solely on small retail ETF funds for speculation; it must become a core component of global major asset allocation.

Comparing it to gold's total market value of $27 trillion, Bitcoin currently has only a $1.3 trillion market value, theoretically providing ample growth space. However, the drastic decline in capital pull efficiency has led to a significantly slower pace of this rally compared to the two previous bull markets in 2017 and 2021, making it considerably more difficult to replicate past hundredfold or tenfold increases.

Even if future inflows of capital set a new historical high, data trends suggest that the percentage increase in subsequent bull markets will significantly be lower than previous cycles. CryptoQuant's latest calculations have already proven that Bitcoin is unlikely to replicate the exaggerated increases seen in 2017.

Circulating chips continue to deplete, with both advantages and disadvantages

The structural changes on the supply side of Bitcoin have an even greater impact on the current market than the logic of capital efficiency. K33 Research Institute's report released on June 15 shows that the proportion of long-term holders’ holdings in circulation has reached a historical high of 79%.

Additionally, as of June 6, only 218,421 Bitcoins dormant for more than two years have been transferred on-chain, marking a new low since 2012 on the same date, during which only 70,600 dormant Bitcoins were moved. In comparison, during the chip distribution phase in June 2024, 1.18 million Bitcoins were transferred out of cold wallets for sale.

Data from the on-chain tracking platform Alphractal also supports this trend: the proportion of long-term holders' holdings has increased from 74% in the previous cycle to the current 78%; approximately 830,000 Bitcoins have shifted from short-term trading wallets to long-term dormant addresses in recent months.

K33 analyst Vetle Lunde noted that the highly concentrated holdings, the minimal movement of dormant coins, and the continuous shrinkage of transaction volume do not indicate the emergence of new selling pressure but are typical market characteristics seen in the later stages of a Bitcoin bear market. The logic is straightforward: more than 80% of Bitcoin is locked in long-term, resulting in a significant reduction in floating chips available for trade in the market. The depth of the order book is thinning, making it easier for any incremental buying pressure from institutions, retail, or ETFs to quickly cause price fluctuations.

Looking solely at liquidity structure, market sentiment appears optimistic, but it cannot determine whether new incremental funds will enter as expected.

Multiple institutions, including Bitfinex, Wintermute, and Glassnode, have repeatedly emphasized that ETF fund inflows, the expansion of stablecoin scales, and the enthusiasm for institutional layouts have not yet reached levels sufficient to support a long-term reversal. A tightening of the supply side is a critical condition for bottoming, but relying solely on chip scarcity is insufficient to confirm a market bottom.

Data from CoinDesk in late June shows that the total holdings of long-term holders in loss reached 5.58 million Bitcoins, the second-highest in history, only following the abrupt decline in March 2020. Interestingly, even though a large number of long-term holders are deeply trapped in losses, the proportion of long-term holdings continues to rise, revealing a market that simultaneously experiences both determined holding and painful liquidation.

Profit and loss indicators signal: fourth extreme bottom region since 2022

On July 3, CryptoQuant released several on-chain indicators, among which the realized profit and loss ratio is the most crucial.

The overall realized profit and loss ratio of Bitcoin has fallen to -0.35, setting a new low in 43 months, comparable to the deep bear market following the FTX collapse in 2022, when the price fell below $16,000.

Historical data shows that once this indicator falls below -0.35, large-scale reversal bull markets were observed in both the 2015 and 2019 bear markets. This indicator represents the realized profit and loss distribution of all tokens on the network, intuitively reflecting that the market is overall in a state of comprehensive loss. A negative value indicates that large-scale stop-loss selling pressure has been adequately released, rather than a drop risk about to arrive.

In interpreting this in the market context, Bitcoin dropped as low as $57,950 on July 1, marking its lowest point in 652 days; it then rebounded by 7%, currently fluctuating in the $61,000-$63,000 range. Swan Bitcoin analyst Adam Livingston pointed out that the current price is only 16% higher than the average realized price across the network; historically, after such a price gap, the average increase over six months is 41%, and over one year is 81%.

Bitwise CIO Matt Hougan recently wrote about the MicroStrategy STRC preferred stock redemption crisis: in June, this stock fell below the $100 par value, reaching a low of $75, leading the market to question the sustainability of Saylor's business model that relies on issuing stocks to hoard coins and distribute dividends. However, Hougan believes that this risk clearance instead helps the market eliminate a large number of weak speculative positions and is not a precursor to a new round of systemic risk.

The market is currently testing crucial support levels repeatedly. This year, Bitcoin has touched the $60,000 mark four times without breaking support; whenever concentrated selling pressure is released, centralized exchanges have continued to see about 50,000 BTC of net inflow daily, reflecting a gradual exhaustion of selling pressure rather than a massive active liquidation. From daily and weekly candlestick patterns, the market is forming a W-bottom reversal structure.

Analyst John Bollinger noted that the current price is testing the lower Bollinger Band, with small fractal bottoming patterns appearing within the larger cycle. If the $60,000 support is effectively broken, the next critical support level would be in the realized price range around $53,000, which is also the core area that bottoming funds must defend.

The macro environment suppresses the market

All on-chain chip and capital changes are established under a bearish macro backdrop. June saw the worst monthly performance for the US spot Bitcoin ETF since its launch, with BlackRock's IBIT experiencing the largest redemption scale in the industry and the total market seeing a net outflow of over $4.5 billion. K33 data shows that while the redemption speed has slowed down, the funds have not shifted toward net inflows.

The turnover of the Federal Reserve chair brings great policy uncertainty, with the market repricing expectations under the leadership of Kevin Warsh, and the trajectory of interest rates has always been a core variable affecting Bitcoin's short-term market. In June, US employment data fell short of expectations, with only 57,000 new jobs created, far below the market expectation of over 100,000, causing a slight rise in rate cut expectations.

European institutional infrastructure is gradually improving. Germany's DZ Bank has introduced Bitcoin trading and custody services in accordance with the EU MiCA regulations, and Deka Bank plans to provide similar products across 340 German savings banks. Institutional infrastructure is developing slowly but steadily in the periphery.

However, this is more driven by demand factors rather than capital flow catalysts.

Conclusion

Considering all signals, if future economic growth becomes a reality, then in order to achieve percentage increases comparable to previous cycles, the required institutional capital will far exceed past cycles due to the decline in capital efficiency.

With the concentration of long-term holders at a historical high, the market's tradable floating chips available to absorb this capital have been greatly reduced.

The significant selling pressure from large-scale stop-loss has essentially been cleared, as the profit and loss indicator has reached its lowest level in 43 months.

Single data points can only reflect local market characteristics. Looking at all indicators combined, the market has already met complete bottoming conditions, but the decisive variable—large-scale incremental institutional funds—has yet to materialize.