Bitcoin Distribution Signals Potential Rally End, Yet Institutional Demand May Support Long-Term Growth

• As the cryptocurrency market matures, Bitcoin’s recent surge above $100,000 has investors on high alert, with new signs of potential profit-taking emerging.

• The accumulation scores among large Bitcoin holders have dropped, indicating a trend shift that could influence market dynamics.

• According to Thuan Capital, “The group of wallets holding the most BTC has started distributing,” signaling changing investor sentiment.

Market analysts warn of potential profit-taking as Bitcoin exceeds $100,000, noting shifting wallet behaviors among large holders.

Two Signs Indicate Profit-Taking May End the 7-Week Rally

The first notable sign is that wallets with large balances have stopped accumulating and have started distributing their coins. Analysis by Glassnode confirms this trend, where the accumulation score for wallets holding over 10,000 BTC plummeted from approximately 0.8 to below 0.5 in May. This significant decline is visually represented by a color shift from blue to orange.

“The group of wallets holding the most BTC has started distributing,” Thuan Capital stated.

Additionally, wallets between 1 BTC and 10,000 BTC exhibit weak accumulation behavior, reflected by gradually fading blue tones. In contrast, wallets with less than 1 BTC demonstrate a distinct shift towards increased accumulation, a response to Bitcoin reaching a new all-time high.

These data points reflect a profit-taking tendency among large investors, while smaller retail investors appear to be influenced by FOMO (fear of missing out) as they chase immediate gains.

Another significant warning sign comes from Unspent Transaction Outputs (UTXOs), which provide an assessment of unrealized profits across unspent BTC. When a substantial portion of UTXOs is in profit, it often indicates heightened market risk.

CryptoQuant data reveals that when 99% of UTXOs are profitable, it typically signifies a market overheating phase. Historically, these phases are precursors to price corrections. Though it remains to be seen whether the correction will be short- or long-term, the warning clearly points to heightened risks for buyers.

“Right now, it’s hard to say we’re in a euphoric phase. The broader macroeconomic context and uncertainty surrounding the Trump administration’s policy direction complicate investors’ ability to adopt a fully risk-on approach. When this 99% signal diminishes, unrealized profits may shrink, prompting more profit-taking and potentially coaxing latecomers to capitulate and sell at a loss,” analyst Darkfost commented.

Currently, Bitcoin’s rally has encountered resistance around $108,000, with no immediate signs of a correction yet. COINOTAG recently reported a significant wave of Bitcoin accumulation among corporations globally. Many experts maintain an optimistic outlook for Bitcoin’s future pricing.

“A tidal wave of institutional demand is reshaping Bitcoin’s market dynamics: wealth-management platforms poised to rollout access to Bitcoin ETFs, corporate treasuries adding Bitcoin to boost shareholder returns, and sovereigns diversifying reserves into Bitcoin to hedge geopolitical risk. Collectively, these factors are generating a structural supply/demand imbalance—and over the next 18 months, Bitcoin is poised to cement its role as a global store of value,” stated Juan Leon, Senior Investment Strategist at Bitwise Asset Management.

Thus, while these short-term indicators suggest a potential pullback from current highs, they remain inconsequential to analysts’ broader expectations for Bitcoin this year and the upcoming year.

Conclusion

To summarize, while profit-taking signals and high UTXO profit percentages may appear concerning, the enduring institutional interest in Bitcoin provides a foundation for optimistic long-term growth. Investors should remain vigilant, yet receptive to the changing dynamics of the market.