On-Chain Data Shows Bitcoin Seller Exhaustion as Losses Mount

Bitcoin closed February with a 20.48% decline, its steepest monthly drop since June 2022, as demand contracted and investors moved away from risk assets. Three separate on-chain metrics now indicate deepening capitulation among holders, alongside early signs that selling pressure may be approaching exhaustion.

On-chain analytics platform Santiment reported that Bitcoin exchange-traded funds have recorded a cumulative $8.475 billion in net outflows since May 6. The firm cautioned against treating that figure solely as a bearish signal, arguing that fund flows are more useful as a sentiment indicator than as a direct predictor of price direction. According to Santiment, crowd behavior tends to be a contrarian guide — meaning prices frequently move against the prevailing market mood over time.

'The bigger this streak of BTC outflows gets, the more we can reliably identify this stretch as frustration, fear, and retail capitulation rather than a fresh reason to panic,' Santiment wrote. The firm added that sustained heavy redemptions imply that many weaker-conviction participants have already exited their positions, which would reinforce the argument that Bitcoin is approaching what it described as a 'prime bottom zone.'

Separate data from blockchain analytics firm Glassnode shows that approximately 10.83 million BTC are currently held at a loss, compared to 9.22 million BTC still in profit. The firm identified this as one of the sharpest profitability deteriorations of the present market cycle. Historically, periods when loss-making supply overtakes profitable supply have aligned with widespread financial stress and capitulation among newer market entrants. Glassnode noted that long-term holders have simultaneously returned to accumulation, though the firm warned that a final volatility spike driven by capitulation cannot be ruled out.

'The data suggests Bitcoin is transitioning from a distribution phase toward one of accumulation, but confirmation is still needed. While the foundations for a longer-term recovery are gradually taking shape, the market may first need to endure one final test of conviction before a sustainable uptrend can emerge,' Glassnode stated.

A third signal comes from analyst Darkfost, who flagged Bitcoin's Net UTXO Supply Ratio. The metric turned negative approximately one week ago and recently reached -0.075, a level that has historically corresponded to a buy signal. The last comparable reading occurred at the end of 2022, coinciding with the conclusion of that year's bear market. Darkfost clarified that the indicator does not pinpoint an exact bottom, but noted that a growing number of metrics have simultaneously reached extreme readings, suggesting Bitcoin is 'entering a genuine devaluation phase.'

'We now have several signals pointing to seller exhaustion. The next step is a renewal of demand, and that could take some time,' Darkfost wrote.

Despite these signals, risks remain. BeInCrypto previously flagged that Bitcoin's Coinbase Premium turned negative in mid-January when BTC was trading near $95,583. By February 24, the price had fallen approximately 33% to around $64,100. The current negative streak in the Coinbase Premium is longer than the one that preceded that decline. Analysts note that if the premium remains negative, the January precedent suggests downside risk has not yet been fully resolved.