The share of speculators in bitcoin has plummeted to 27.6%: the market signals an approaching bottom.
The Bitcoin market is undergoing a fundamental restructuring. My on-chain data analysis shows that the share of short-term holders (STH) in the realized capitalization of the first cryptocurrency has fallen to 27.6%. This metric, which I track particularly closely, indicates that the speculative bubble has almost completely deflated, and the market is entering a historical undervaluation zone.
How the Realized Dominance Metric Predicts Cycles
At the core of my methodology lies the "realized dominance" metric, which shows where real capital is concentrated — among short-term traders (coins held for up to 6 months) or long-term investors (LTH). Historically, cycle peaks in 2013, 2017, and 2021 formed when the STH share reached extreme values, exceeding 90%. This is the moment when the market is overheated and greed is at its peak.
Bear phases trigger the reverse process. Speculators lock in losses and exit the market, their dominance falls, and capital flows to long-term holders with "diamond hands" and lower entry prices. I identify three statistical zones: above 94.8% — the overheating zone (top 10% of observations), around 50% — historical equilibrium, and below 28.7% — the undervaluation zone (bottom 10%).
Current Data: Undervaluation Zone and Risk of Final Capitulation
The current value of 27.6% places Bitcoin directly in the undervaluation zone. This suggests that speculators have been largely washed out of the market, long-term investors are regaining control, and the capital structure is approaching that which historically preceded major cyclical bottoms, such as those in 2018 and 2022.
However, I would caution against excessive optimism. The data shows that bottom formation is a process, not an event. In previous cycles, STH dominance continued to decline as more unstable participants capitulated before the recovery. It is possible that before a new accumulation cycle begins, the market will need one more, final phase of capitulation.
My expert opinion: The market has been cleansed of "weak hands," and fundamental metrics signal the approach of a macroeconomic bottom. Nevertheless, full confidence in a trend reversal will only emerge after a final surge of fear and mass capitulation, which will definitively clear out speculators' positions. Now is a time for patience and strategic accumulation for those looking at a 12-18 month horizon.