Short-term wallets cut losses as capitulation hits 2022 FTX crash levels

Capitulation is back—and it's hitting levels not seen since the FTX implosion. Short-term holders are dumping positions, signaling a potential washout moment.

The Panic Meter Spikes

On-chain metrics show short-term wallet activity mirroring the 2022 crash. That's when fear peaked and leveraged positions evaporated overnight. The data doesn't lie: we're seeing similar distress selling.

What This Really Means

It's a classic shakeout. Weak hands exit, often right before a reversal. This kind of capitulation historically scrubs excess speculation from the market—clearing the deck for the next move. Think of it as the market's brutal, self-correcting mechanism in action.

For the veterans, this smells like opportunity. For the newcomers, it feels like disaster. The difference is just perspective—and maybe how much you borrowed to get in. After all, in crypto, 'long-term vision' is often just a story told by people holding bags.

The takeaway? Extreme fear is a signal, not a verdict. Markets breathe in greed and exhale panic. We're in the exhale.

BTC short-term capitulation may signal a market bottom

BTC returned to a recent local high of $94,000, later sinking below $92,000 again. The market is showing signs of returning momentum, but remains shaky in the short term. 

The selling and capitulation, however, are seen as a sign of a local bottom. In 2025, one of the biggest events of realized losses was in August, followed by another market upturn. 

During the Bitcoin slide from its October peak, the capitulation did not happen until the asset touched local lows under $85,000. Retail and short-term buyers sold to cut losses, while whales and long-term holders usually sold closer to the peak.

In September, short-term holders were more willing to hold with unrealized losses, but the accelerating price slide pressure finally made some of the buyers capitulate at a lower price. 

Not all short-term holders sold at a loss. Actually, on average, those wallets have a small net gain. The short-term holder realized price is at over $104,000 per BTC on average, higher than the current market price. The average price showed a wave of strategic short-term wallets that are still trading BTC, ready to realize gains at a favorable price. 

Bitcoin volatility increases close to one-year peak

BTC volatility is showing the leading coin is entering a more turbulent trading period. Volatility expanded to 2.49%, close to the highest range for the past 12 months. 

Usually, BTC volatility remained below 2% in 2025, entering a more mature market period. This period is a timely reminder from BTC to the market that it can still face waves of panic, especially following de-leveraging events. 

BTC still trades with a fearful sentiment, putting the fear and greed index at 28 points. 

More selling pressure can come from miners, who are producing blocks under distressed conditions for the first time since August. The hash ribbon indicator flashed again after a months-long period of highly profitable mining.

Historically, hash ribbons indicators roughly coincide with local bottoms for the market, or periods of higher volatility. 

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