As Bitcoin Prices Fell on Monday, Short-Term Holders Sold, Leading to a Record Drop in CME Open Interest.

Bitcoin Capitulation May Signal a Local Bottom as Short-Term Holders Exit

Monday’s sharp decline in bitcoin prices is being seen by many analysts as a textbook example of capitulation, signaling a potential local market bottom. Short-term bitcoin holders, those defined by Glassnode as addresses holding coins for less than 155 days, exited the market at a loss as bitcoin’s price fell by as much as 4.7%, the largest drop in two weeks.

Over 21,000 BTC ($2.2 billion) was sent to exchanges by these short-term holders, marking the second-largest transfer of the month. This was triggered as bitcoin prices dropped below $98,000, after having touched highs near $108,000 earlier in the year. Many of the holders who bought near these highs were likely spooked by the rapid fall back into the five-digit range.

These short-term holders, often active traders and newer market entrants, are especially vulnerable to price swings and tend to sell during sharp declines. The latest drop came amid concerns sparked by the release of a Chinese startup, DeepSeek, which raised questions about the U.S.’s leadership in AI and technology.

Other signs of capitulation were seen throughout the market. For instance, perpetual funding rates for BTC flipped negative, reflecting an increase in bearish bets, a typical signal that bitcoin is nearing a price bottom. Similar market behavior was seen in prior instances, such as on Jan. 13 and Aug. 5, when bitcoin prices hit notable lows.

The Chicago Mercantile Exchange (CME), often viewed as a proxy for institutional activity, also experienced a dramatic decrease in open interest (OI), with notional bitcoin OI dropping a record $2.4 billion (17,000 BTC). This slide in open interest helped drive the basis lower, as reported by Glassnode.

In addition, U.S.-listed bitcoin exchange-traded funds (ETFs) saw a substantial outflow of $457.6 million, mirroring the pattern seen on Jan. 13. This suggests that institutional investors are also retreating from the market amid increased volatility and uncertainty.