Executive Summary
The Story So Far
Why This Matters
Who Thinks What?
Bitcoin’s recent price movements indicate a significant cooling off from its prior “euphoric phase,” as the cryptocurrency experienced a 14% drop from its stated $124,500 all-time high to a seven-week low of $107,400 on Saturday. This correction has shifted the market into a period of widespread net distribution and demand exhaustion, with analysts now eyeing the $112,000 to $114,000 range as a critical threshold to confirm a market bottom and attract renewed capital inflows.
Market Correction and Cooling Euphoria
The sharp decline to $107,000 suggests a phase of “exhaustion” in the market. This follows a rally in mid-August that pushed 100% of Bitcoin’s supply into profit, a situation that typically requires persistent capital inflows to offset continuous profit-taking, which rarely endures for extended periods.
The most recent euphoric phase for Bitcoin lasted approximately 3.5 months, during which over 95% of the supply was in profit. However, Bitcoin fell below this threshold on August 19, signaling that demand had finally begun to show signs of exhaustion, according to market intelligence firm Glassnode.
Key Price Levels and Consolidation
Currently, 90% of Bitcoin’s supply remains in profit, corresponding to a cost basis range between $104,100 and $114,300. Historically, this particular zone has often served as a consolidation corridor following euphoric peaks, frequently leading to choppy, sideways market action.
A break below $104,100 could signal a replay of previous post-all-time-high exhaustion phases seen earlier in this cycle. Conversely, a sustained recovery above $114,300 would suggest that demand is regaining its footing and reclaiming control of the market trend.
Short-Term Holder Sentiment
The percentage of short-term holder supply in profit dramatically collapsed from over 90% to just 42%, which is indicative of a textbook cooling-off period for the market. Such rapid reversals often trigger fear-driven selling from recent buyers, typically followed by an exhaustion of these sellers.
With Bitcoin’s recent rebound to $112,000, more than 60% of short-term holder supply is now back in profit. However, this recovery remains fragile, requiring a sustained move above $114,000–$116,000 to bring over 75% of short-term holders back into profit and generate the confidence needed to attract new demand.
Resistance Levels and Path Forward
Bitcoin continues to face significant resistance around the $112,000 mark, where relief rallies have stalled multiple times this week, indicating strong defense by bears. The price is encountering stiff opposition from the $111,700-$115,500 supply zone, which also aligns with the 100-day simple moving average (SMA) and the 50-day SMA.
For bulls to confirm the end of the current correction, they must successfully transform this resistance area into new support. Additionally, the 20-day exponential moving average (EMA) at $112,438 presents another hurdle that Bitcoin must overcome to confirm higher lows, potentially paving the way for a rally towards previous all-time highs.
In summary, Bitcoin is navigating a critical period of consolidation as it cools from a prolonged euphoric phase, marked by demand exhaustion and profit-taking. The ability of the cryptocurrency to decisively break and hold above the $112,000 to $116,000 resistance cluster will be paramount in determining whether the market has found a bottom and is poised for renewed upside momentum, or if further downside corrections are on the horizon.
