With the increase in the volume of Bitcoin open contracts and the continuous increase in key price points in the liquidation map, the market's divergence has begun to intensify further. Is the current rebound turning into a reversal, or is it the second distribution of the downward relay?
This is what the author has observed from the market. There are two mainstream views on future trends. Both views have support from many analysts. The two views are based on completely different data and angles, but a careful look at the core of their thinking reveals that they both lead to the same conclusion. Therefore, the context of today's sharing is to start from supply and demand, and analyze how the views on reversal and secondary distribution come from the same root, that is, they both start from the analysis of supply and demand, but come to completely different conclusions.
At the beginning
K-line is the price trend. It is the most superficial visual graph of the supply and demand relationship. The increase and decrease of buying and selling intensity constitute the ups and downs of prices. The formation of each K-line is the result of the confrontation between the buying and selling forces, and is a compressed image of the changes in the supply and demand structure. Furthermore, buying and selling have intensity, which can be directly observed from the trading volume.
If we think further, why do prices change? Why pull back at a certain position? Why do breakouts sometimes fail?
Here the author shares a marble theory to facilitate explaining the changes in the influence of tariff policies and the levels of momentum formed when supply and demand change. The marble theory is an idea that transforms the supply and demand relationship from abstract to concrete. The supply and demand relationship in a narrow sense can be easily seen in the order book. Orders of different pending orders form glass of varying thicknesses, and each actively executed transaction order is a marble with kinetic energy. The price change process is essentially the process of these marbles constantly hitting the order book, breaking through the glass, and pushing the price forward.
The thickness of the glass represents the liquidity depth and order density at a certain price level; the kinetic energy of the marble comes from the volume and speed of active buying or selling. Every advancement in market prices is the result of the marble breaking through a layer of glass and the price jumping to the next layer. If the kinetic energy is strong, it may penetrate multiple layers of glass continuously; if the kinetic energy is insufficient, it may get stuck in a certain layer or even bounce back. When the market fluctuates violently, switch to the 1-minute level and you can find such pinball-style trades.
This explains the unpredictability of prices on short time frames, as it can be seen as a chaotic movement between two thick layers of glass. Compared with "price trends", the marble theory emphasizes "motivation structure"; compared with predicting K-lines, the marble theory attempts to restore the physical process of price driving. This is a way of analysis that is closer to the essence of the market.
From the appearance of K-line, combined with time and trading volume, countless trading indicators can be derived. Most of these indicators are not included in today’s discussion, but those that involve supply and demand relationships will be mentioned in the following content.
Based on the marble theory, we can get the following abstraction:
- Order thickness = depth of a price layer
- Active Trading = Marbles
- Volume = Kinetic Energy of the Marble
- Impact cost = the energy loss of the marble penetrating the glass
Based on this idea, we can further draw the following assumptions:
- The market price does not slide continuously, but jumps through one price range after another.
- The density of pending orders at different price levels varies, and the difference in thickness creates support and pressure;
- The larger the active trade, the stronger its momentum, which can push the price through more "glass layers";
- Some pending orders in the market are "false liquidity" and do not represent real intentions. When the marble hits this kind of glass, a false breakthrough will occur;
Price behavior has inertia. When the momentum is too strong, it may cause the price to "break through the top", resulting in overheating or overcooling, that is, overbought or oversold.
This is the theory the author has drawn from two viewpoints and from his own trading experience. When making a transaction, you can just look at the K-line, because all the supply and demand relationships are hidden in the K-line. If your trading level is high enough, you can just look at the K-line to determine the direction of the supply and demand relationship, as well as the control of the arrival of the critical point. Experts simplify things, and the K-line is enough.
Let me give you two simple examples: a long green candle usually means that buying power dominates the cycle, demand continues to rise and swallows up pending orders, and the momentum strongly breaks through multiple layers of "glass"; while a long black candlestick reflects the repressive dominance of supply, buyer support is weak, and prices quickly break through multiple support levels. The kinetic energy of the marble comes from the strong willingness of the seller.
If you cannot see the supply and demand relationship by observing the K-line, you will need the assistance of more indicators, such as the volume of open contracts, spot premium conditions, liquidation maps, and find data support to assist your transactions from more angles.
Whether the rebound strengthens into a reversal, or the relay is distributed for the second time, these are conclusions drawn based on their respective perspectives. The former believes that demand is greater than supply, while the latter believes that supply is greater than demand. To put it more directly, the former believes that the bull market is still there, while the latter believes that the bear market has formed and will continue to deepen. From a physical perspective, more people are optimistic that the rebound will turn into a reversal, which means that more people are optimistic that the bull market will not end. Therefore, I will first introduce the theoretical basis of the first view.
The first view: The rebound is likely to turn into a reversal
The first point of view can be roughly divided into three different situations where demand exceeds supply. The discussion of supply relationships from long-term and short-term holders to concentrated chip areas comes from @Murphychen888, and the views proposed by Murphy will also be used extensively in the following text.
The first is the relationship between long-term holders (LTH) and short-term holders (STH). The conversion of profit and loss status between LTH and STH often indicates important market turning points. The first sub-argument is to observe the changes in the long-term holder profit and loss ratio (LTH-RPC) to capture market bottom signals. When the indicator shows that long-term holders are beginning to suffer widespread losses, it often means that the market is approaching a stage low.
The indicator principle is:
- When the profit ratio of long-term holders drops significantly and losses occur, it means that the profit space that can be realized is greatly compressed.
- The continued loss will suppress the willingness to sell. As the number of chips available for sale decreases, the market selling pressure will gradually weaken.
- When the selling momentum is exhausted to a certain extent, the market will naturally form a price bottom.
Historical data support:
- At the bottom of the bear market in 2018 and 2022, the proportion of losing chips of long-term holders reached the range of 28%-30%.
- In the extreme market conditions in March 2020, the indicator also climbed to around 29%.
- In a bull market cycle, when this ratio reaches 4%-7%, it usually corresponds to the low point area of the adjustment market.
Current market characteristics show:
- The percentage of losses for long-term holders has risen from almost zero to 1.9%, close to the level in July 2024
- Considering that the Bitcoin purchased at a cost of $90,000 to $100,000 from the end of 2024 to the beginning of 2025 will soon be converted into long-term holdings (currently in a floating loss state), it is expected that this ratio will continue to rise.
- When the loss ratio enters the threshold range of 4%-7%, more certain layout opportunities will emerge
When the vast majority of long-term holders are in profit, every price rebound will trigger profit-taking, creating continuous downward pressure. Historical experience shows that whether it is the bottom of a bear market or a bull market pullback, when long-term holders generally turn into a loss-making state, it often means that the market is about to bottom out. Because the selling momentum has been fully released at this time, the unsustainable selling pressure will cause prices to stabilize and rise.
Although the current market has shown signs of "surrender" by some long-term holders, from the perspective of timing selection, it is still in the left-side layout stage, but the potential rate of return may be considerable.
The second small argument is STH-RPC, the profit and loss ratio of short-term holders. It is different from observing long-term holders incurring losses and entering the market on the left side. The profit and loss ratio of short-term holders is a right-side entry signal, proving that current demand is far stronger than supply.
Indicator principle:
- When new short-term participants in the market gradually turn from loss-making to profit-making, it usually means that overall confidence is recovering. Such changes are often accompanied by a reversal of market trends and are a key turning point signal for market sentiment.
Indicator trigger critical point:
- Once the average cost of short-term holders exceeds their holding costs, it indicates that this group of funds is achieving a reversal of profits and losses. Their profit-taking sentiment will lead to stronger buying momentum, pushing prices to continue to break through the previous trading range until the upward momentum is neutralized by selling pressure from long-term investors. Therefore, when the "short-term holding cost line" crosses the "cost line", it often means that the market is warming up and the trend reversal signal has appeared on the right side of the chart.
There is no trigger at the moment, but the yellow line has begun to converge towards the blue line. The curve convergence based on this indicator is still a left-side entry idea.
The extreme deviation pricing range based on the MVRV ratio can also be seen as glass of different thicknesses. When the overall break-even is reached, investors are unwilling to exit the market with further losses, and the downward momentum of the marble decays. This shows that most market participants are still optimistic about the long-term prospects of Bitcoin and are not shaken by short-term fluctuations.
If the market atmosphere is dominated by "bear market expectations", when prices fall below the key cost line, it will often trigger a series of panic selling rather than the current rapid stabilization. Combining the current profit and loss pattern of long-term and short-term holders, as well as the trend characteristics of weakening downward momentum, it can be inferred that the market is very close to the regional low point, and this stage has a strong left-side entry value.
The second view is the supply and demand relationship between stablecoins and Bitcoin, namely BTC-SSR.
The BTC market value divided by the market value of all stablecoins represents Bitcoin's ability to capture liquidity from the entire stablecoin pool. The stronger this ability is, the higher the probability of price increases will be, and vice versa.
From the trend of BTC-SSR, we can see that since the market started at the end of 2023, as long as there is a divergence between Bitcoin and stablecoins, stablecoins are very likely to flow into Bitcoin, pulling BTC-SSR back into the range. This graph has two high points, on March 13, 2024 and November 21, 2025, with corresponding prices of 73k and 98k.
The four regional lows were on August 5 and September 6 last year, and March 10 and April 8 this year. All prices were regional lows.
Further observing the comparison between the market value of stablecoins and the market value of Bitcoin, whenever there is a divergence between the market value of stablecoins and the market value of Bitcoin, BTC-SSR will quickly begin to decline until it reaches the ratio when the market started in 23 years, which means that the momentum of stablecoins flowing to Bitcoin is constantly accumulating, and once the demand area is reached, the energy will be released immediately. The current market value of stablecoins is still accelerating, and the continuous inflow of stablecoins is very likely to drag up the market value of Bitcoin, provided that the bull market still exists and the trend has not disappeared.
The third view is that high and low chip concentration areas will form a double anchor effect
This view still comes from Murphy. Previously, we expanded the definition of supply and demand from the narrow sense of order book buying and selling to the supply and demand of long-term and short-term holders, and then further extended the time dimension. Observe the historical supply and demand relationship of Bitcoin. One indicator worth observing is the dense chip area.
Indicator principle:
The dense trading of Bitcoin within a specific price range reflects the recognition and layout of a large amount of funds. When the price falls, those who hold coins at high positions are unwilling to sell them, thus forming a "damping force", similar to branches on a cliff, which can slow down the price decline; conversely, those who hold coins at low positions have strong bullish expectations and are often willing to hold on to their coins and wait for prices to rise, like protruding stones on a rock wall, which can support prices. The combination of these two forces forms the key support structure for the market.
Historical data support:
In June 2024, Bitcoin gathered about 8% of its chips in the $39,000 to $43,000 range, forming an obvious support zone, while 12% of its chips accumulated between $60,000 and $68,000, forming a strong resistance zone. During the period of external shocks from July to August last year (such as the German government's sale of BTC and the covering of yen carry trades), the price fluctuated between $43,000 and $60,000, showing that these two concentrated chip bands successfully built a buffer zone.
In particular, on August 5, 2024, BTC fell back to a minimum of $49,000, which happened to fall between the two dense areas, confirming the natural anchoring effect of the chip structure on the price.
In November 2022, the FTX incident triggered a market liquidity crisis, but the BTC price remained stable between the two high-chip density areas of $6,000-$10,000 (13% of the chips) and $18,000-$22,000 (19% of the chips). On November 9, it fell to a low of $15,500, which was exactly in the middle of these two ranges, showing that even in extreme panic, the chip structure can still provide stable support.
Failure cases where the anchoring effect was not formed:
In March 2022, after falling from a high of $69,000, BTC traded sideways around $35,000-$45,000 for nearly two months. At that time, the market was deeply divided. Some people believed that this was a bull market adjustment, while others believed that it was the beginning of a bear market. However, judging from the distribution of chips, there is no concentrated holding below the price, and the chips are evenly distributed in the range of $25,000 to $66,000. The chip accumulation that truly has the ability to support the market is far below $6,000-$12,000. As a result, driven by panic, prices quickly fell below the sideways range and eventually confirmed entering a bear market.
Current status:
Currently, approximately 11% of the chips are concentrated in the $60,000-$70,000 and $93,000-$100,000 ranges respectively, forming a symmetrical structure. If we refer to past historical performance, this distribution pattern has the ability to limit price fluctuations to the $70,000-$93,000 range. As long as this chip structure is not destroyed, the "consensus center" of the price axis will most likely be re-established between these two dense areas.
The anchoring theory can also be explained by the marble theory. The kinetic energy that makes the price fluctuate up and down is like a stretched rubber band. When the price moves towards the low-chip concentration area, the upward kinetic energy can continue to accumulate. Before touching the low-chip area, it will be stimulated upward and a rebound will occur. Therefore, $70,000 will become the core support that is not easy to break in this cycle.
After analyzing the view that the current rebound will turn into a reversal, we discuss the impact of tariffs in this process. Let me first state the conclusion: the impact momentum of a single event on the market will gradually decay if the event does not deteriorate further.
This round of market adjustments caused by expectations of tariff policies can be divided into three stages: February 25 to 28, March 10 to 13, and April 7 to 10.
Based on the behavior of investors transferring their losing assets to Binance during the decline, we can more objectively quantify the intensity of the impact the market has endured at each stage. Data shows that the realized losses in the first phase reached US$139 million, much higher than the subsequent two phases, which were US$43.92 million and US$58.90 million respectively. This type of behavior shows a clear decreasing trend on the chain, indicating that the market suffered the greatest psychological shock in the early stages. Although there are still panic reactions in the subsequent stages, the magnitude tends to converge.
The violent sell-off has pushed prices back into demand, and there is a high probability that Trump will not send more negative signals on tariffs than before. For most countries, tariffs are raised high and brought down lightly, with limited destructive power. The 10% reciprocal tariff has served its purpose. Trump cannot afford to see a further sell-off of 10-year U.S. Treasury bonds and can only operate within a range that does not cause panic in the selling of U.S. Treasury bonds. The destructive power will be further controlled, the buff that tariffs add to the supply side will begin to fail, and the downward momentum will begin to decay. Therefore, market sentiment will gradually ease, short-term holders will gradually make profits, and the selling pressure from long-term holders is far from coming. There is a possibility that a large amount of stablecoins will flow into Bitcoin. This is the basis to support that the current rebound may strengthen into a reversal, and the attractiveness of entering the market from the left side is increasing.
The second view: The current rebound is the second distribution after accumulation.
This view holds that the current phase is a downward relay towards a long-term bear market. The macro-level reasons discussed include the possibility that tariffs will cause increased inflation, leading to stagflation and thus accelerating recession.
However, the core of this type of view is that the U.S. stock market has entered a technical bear market, and its continued decline is inevitable. Bitcoin cannot be immune to this and does not have independence, and will be dragged down by the U.S. stock market. Therefore, here we share the basis for determining that the U.S. stock market has entered a technical bear market.
The second view is that the performance of the US stock market in the past few months is completely consistent with the Wyckoff-Distribution Phase. The author explains this point of view based on the price and corresponding trading volume situation, that is, the quantity-price behavior. The yellow arrow in the figure indicates that we need to pay attention to the pattern of daily trading volume; the light blue shoulder indicates that we need to pay attention to the pattern of trading volume over a period of time.
On November 6, prices began to rise sharply, while trading volume increased and price spreads widened, indicating that a stage high was about to arrive. This is PSY - the original supply point.
Late November to early December is the BC buying climax: also known as the buying intensive area. Both trading volume and price spread expanded significantly, and the strength of selling reached its peak. Near the market top, the public's eager, large-scale buying is met by large-scale selling orders from major players.
On December 18, AR naturally fell back after the buying climax. Buying was almost exhausted, but selling continued, so a natural decline occurred. The low point of the natural decline helps define the market bottom of the distribution trading range.
The heavy buying on December 20 was the first accumulation of funds, i.e. the second test of ST: after the natural decline, the price rose again to the vicinity of the buying climax area to test the supply and demand conditions of the price near the buying climax area. As price approaches the resistance zone of a buying climax, volume should decrease and the spread should narrow, which means that supply will be greater than demand and a price top is confirmed.
SOW weakness signal appears in late December to early January: Weakness signal usually occurs at the end of distribution, the price falls to the bottom of the distribution range, or slightly breaks through the bottom of the distribution range, often accompanied by increased trading volume and widening of the spread. The weak signal means that supply is controlling the market.
Between January 13 and January 23, UT surged and then fell back: the purpose of the surge and then fell back was to lure the last wave of buyers to continue to enter the market and long, while at the same time knocking out the stop loss set by the short sellers who entered the market in advance. An upward surge and then a decline is a price stop behavior, but the public feels that the price is going to break through the range resistance upward, because the main force does not want the public to see that the price is about to fall.
On February 19, UTAD surged and then fell after the distribution: it was the final test of the new demand generated after the price broke through the resistance line of the range.
February 19 to early March: Demand was falsified, and trading volume accelerated the exodus.
The last supply point of LPSY appeared on March 25: even with large-scale buying, after SOW tested the support strength of the ice line, the price rebounded weakly and the spread narrowed, all of which showed that it was difficult for prices to rise. The reason why prices are having difficulty rising could be because demand has dried up or supply has taken control of the market. The last supply point is the last wave of distribution by the main force before the price drops rapidly.
The price pattern of U.S. stocks and the corresponding expansion or contraction of trading volume are completely consistent with Wyckoff's distribution theory. This proves that the U.S. stock market has completed the sprint at the end of the bull market and the distribution has been completed. Next, we need to find LPS, which is the last support point, to turn the bear market into a bull market. Before this, it is all a bull trap and you should short on short.
The difference between the two mainstream market views can be seen as expectations for the U.S. stock market and the possibility of Bitcoin decoupling from the U.S. stock market: that is, if the U.S. stock market cannot stop falling, whether Bitcoin can remain unscathed; or whether the U.S. stock market can bottom out here, and Bitcoin will rebound first.
Market differences have further intensified. Which view do you agree with?
