Reset Supply: Why the massive distribution of LTHs in 2025 could precede a new bull cycle for Bitcoin

Bitcoin trades near US$ 96,80K this Friday, after weeks of sideways oscillation that tests short-term traders’ patience. While market spotlight focuses on trade tariff deliberations and Federal Reserve decisions, a deeper phenomenon is occurring in wallets: long-term holders ended 2025 with the largest distribution wave ever recorded. This aggressive clearing of dormant positions may be exactly what precedes the formation of a solid base for 2026.

The Historic 2025 Liquidation and the Restart of Supply

On-chain data tell a fascinating story: between November and December, approximately US$ 300 billion in BTC re-entered circulation through the hands of LTHs. Researcher Axel Adler Jr. identified an unprecedented 30-day distribution peak reaching 1.14 million BTC in November—a volume unmatched in the past five years.

This was not an orderly profit-taking. It was mass capitulation. The long-term supply dropped dramatically from 15.4 million to 13.6 million BTC, signaling that investors holding old coins—those that had been dormant for years—decided to exit almost simultaneously. Historically, when LTHs surrender in this manner, they set the emotional and technical bottom for the next move.

The Precedent of Past Cycles

This pattern is not new. In 2018, massive distribution by long-term holders preceded the collapse to US$ 3,500, which then became a springboard for the rally to US$ 11,000. In 2020-2021, LTH supply decreased while prices escalated to US$ 61,000. The message is clear: when major holders finally give up, the market tends to find its balance.

What differentiates 2025 is the abrupt intensity. The drop in supply occurred over weeks, not months. This suggests the event was concentrated, leaving little selling ammunition for the coming months. Since December, LTH supply has stabilized at 13.6 million BTC, indicating the distribution frenzy has passed.

The LTH/STH Ratio: The Market Bottom Thermometer

A key technical indicator in this scenario is the ratio between long-term and short-term holder supply—the LTH/STH ratio. In December, this index fell to -0.53, a territory that historically precedes the formation of robust bases or new highs within weeks.

Whenever this metric hits or exceeds -0.5, Bitcoin undergoes a volatility compression before momentum expansion. Currently, the market is at this critical point. New buyers are absorbing the stock that was dumped in Q4 2025. When this balance consolidates, the structure better withstands external pressures.

The Macroeconomic and Technical Framework

The immediate context weighs heavily. Unemployment data came in below expectations but did not convince the Federal Reserve to change course. The expectation is for interest rates to remain steady until at least the end of January. This monetary inertia acts as a brake on assets that do not generate fixed income—exactly Bitcoin’s case.

In charts, Bitcoin frequently interacts with the 200-period cloud on smaller timeframes, signaling indecision between levels of US$ 88,000 and US$ 92,000. A breakdown below US$ 88,000 could trigger a cascade of liquidations. But there is an open gap in CME futures near the year-end that still needs to be closed.

Expert Michaël van de Poppe emphasizes that maintaining the 21-day moving average is vital to avoid larger drops at this critical moment. Many analysts, like Daan Crypto Trades, prefer not to risk 5% moves while inertia persists, waiting for a more decisive breakout.

The Turning Point in 2026

The convergence of on-chain supply stabilization, the LTH/STH ratio in a critical zone, and the absence of new massive selling pressures suggest that the preconditions for a recovery are forming. The period of aggressive distribution may be coming to an end.

The Supreme Court in Washington still needs to rule on Trump’s trade tariffs, a catalyst that could ease pressure on risk assets. But the real catalyst might be quieter: the exhaustion of sellers. When old coin holders finally give up their positions, those remaining are precisely the long-term believers. Historically, it is at this point that new cycles begin.