Murphy

203 days, it ultimately feels a bit short...

The essence of a bear market is the lingering emotions; recovery is a long process. No one knows how long it will take, we can only speculate based on various data.

However, in this bear market, the investor confidence index has bounced back from "underwater" to "above water" in just 203 days, and this data point still holds a positive significance!

Because it clearly shows us:
When prices test previous lows again, the confidence index hasn’t plunged into extreme negative territory like it did last time.

This quantifies the "market sentiment" showing divergence from "price action".

If we were to simply draw a parallel, the data pattern this time is almost identical to the previous cycle: the same volatility rhythm, both are 1-2-3-4; now we are at 5, and this 5 is lower than 3.

So, I don’t think this is the starting point for a return to panic; rather, it feels more like the darkness before dawn...

Of course, this is just my personal opinion,
I’m not trying to convince anyone.

In this round, retail traders have shown with their actions who the real "big fool" is 😂😂😂

ps: MSTR is currently holding at a cost basis of $75,680, with an unrealized loss of about $10.048 billion...

By categorizing the net inflow/outflow of $BTC from the exchange by scale, we can see the following insights:
1. From 5/19 to 6/5, the consensus among the whales was quite aligned; transfers over $1 million (whales) were primarily 'inbound' to the exchange.

2. After 6/5, the consensus among the whales started to diverge; investors in the $1 million range predominantly 'out' while those in the $10 million range (super whales) still leaned towards 'in'.

3. However, it currently seems that this divergence is gradually narrowing; super whales were net transferring in 4000 BTC daily (7-day average) on 6/5, but by June 12, that number had dropped to 111 BTC.

At the same time, whales are withdrawing BTC from the exchange at a rate of 2000 BTC per day.

4. Interestingly, retail investors with single transactions between $10k and $100k; after 6/5, they have also been withdrawing an average of 200-300 BTC daily.

This marks the third occurrence of such behavior among retail investors in the past year, and in terms of scale, it far exceeds the previous two instances (December 2025 and February 2026).

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This round of retail investors has really leveled up! No matter how much Tom Lee and Michael Saylor have shouted, or how high those institutions have predicted, they sell when it's time to sell and buy when it's time to buy, without hesitation.

In summary, it appears that the two heavyweight groups are moving from divergence back towards consensus, both aiming to reduce supply on the exchange. The signals from retail investors reflect the beginning of long-term accumulation among ordinary investors.

(Update) As of June 10, LTH's net holdings have temporarily returned to positive! A net increase of 8,173 coins over the past 7 days. This doesn't mean LTH has stopped selling; rather, their distribution volume is less than the total accumulation from LTH's buying and STH conversions.

It's like that math problem we did back in elementary school: when the outflow is less than the inflow, the water level rises.

In fact, LTH's net holdings began to gradually climb since June 4, coinciding with a significant drop in the U.S. stock market.

During this time, there were also factors affecting market sentiment and risk appetite, such as inflation rebound, interest rate hike expectations, and the U.S.-Iran conflict, yet BTC managed to hold above 60k.

This proves that BTC can maintain a degree of independence at certain times.

Especially during structural resets (where profit and loss circulation is at 50%), the supply-demand dynamics have a greater impact on price than sentiment and liquidity.

While we don't know if LTH will switch back to a 'distribution mode' in the future, one thing is certain: as long as LTH's net holdings continue to grow, BTC's price can remain stable.

Notably, the correlation with the U.S. stock market is weakening rather than strengthening.

Short-term whale accumulation has offset some of the market's sell pressure.

The accumulation trend score reflects the relative size of entities accumulating BTC on-chain over the past 7 days. The scoring criteria take into account two factors: 1. the entity's balance; 2. the amount of accumulation or distribution.

The closer the accumulation trend score is to 1 (blue), the larger entities are generally accumulating BTC; the closer it is to 0 (red), it indicates they are distributing or not accumulating. The black line represents the BTC price.

We focus on the 100-1K and 10-100 groups, as these sizes are typically real buyers, while larger scales could be exchanges or third-party custodians.

Both of these groups actively began accumulating chips after BTC experienced a rapid drop in November last year and again in February this year (circled with a dotted line in the chart).

This helped offset some of the selling pressure in the market at the time and provided relief.

Interestingly, the 1-10 and <1 retail groups show a different behavior. While the 10-100 large holders appear more cautious, retail actions seem more aggressive.

These wallets are mostly left by ordinary investors who bought from exchanges and then withdrew their coins to store on-chain. But why does it feel like more people are waiting for lower prices?

Data doesn’t lie. When sentiment diverges from data performance, I choose to trust the latter.

LTH-NUPL is one of the effective tools for measuring the pressure and sentiment of long-term holders, and it's an indicator that has hardly ever missed in the past.

When LTH sentiment pressure dives into the 'red capitulation' zone, it's usually a prime spot to scoop some up.

Currently, LTH-NUPL is around 0.2, sitting in the 'orange fear zone.' If our goal is to build a long position, we can say we’re definitely in the range now.

However, the participation structure of LTH in this cycle is a bit different from the past, so we can't be sure if we will or won't see a 'capitulation zone' later on.

But based on historical trends, it's likely we will.

That said, the shift from 'fear' to 'capitulation' doesn't necessarily mean prices will plummet significantly. Sometimes, a prolonged range consolidation can also shift NUPL from orange to red.

So, if you want to make the bottom-fishing process more precise, it’s best to have a plan in place ahead of time and manage your pace and position size wisely.

Big news, it's here......

BTC dropped from 81k to 61k, a decline of over 20%. The 1-week and 1-month implied volatility (IV) have also bounced back from their previous lows to 60% and 47%, respectively.

The volatility is starting to materialize.

The triggers for this drop are multifaceted, but the structure of IV at lower levels had already set the "fuse"; any unexpected events can trigger the amplification mechanism automatically.

Moving forward, if the market prices things in, and the short-term volatility expectations normalize, the likelihood of the market entering a consolidation phase increases.

If IV rises again and then falls back to low levels, the market may slip back into "overly calm" conditions, which could mean a new round of volatility is accumulating.

One point worth emphasizing again: IV never predicts direction, only magnitude.

Last time we looked at the stars, we noticed that the red line was moving about 3-4 months faster than the blue and green lines, with the sequence of downtrends being red-blue-green.

From the chart, the last dip of the blue line was in August, the green line's final drop was in October, and now the red line has once again pulled ahead of the blue/green lines, around the same 3-4 month mark.

So, from a crypto perspective, the downturn we're currently experiencing might just be what they call the "final shakeout."

As for where this "shakeout" might go? It looks like there are 2 possibilities:

Possibility 1: The red line oscillates between the blue and green lines. Historically, the red line has often hovered between blue and green during bull tops, and conversely, it’s reasonable for it to sit in that range during bear bottoms.

For example, right now, the red line is indeed between the blue and green lines. If this scenario plays out, we could be nearing the bottom.

Possibility 2: The red line could converge with the blue and green lines after October, completing the trifecta, marking the timeline of a 4-year traditional bull/bear cycle. Regardless of what the price is at that moment, as long as the three lines converge, that’s the bottom.

Even in "Scenario 2," the current position of the red line isn’t far off, so 60k+ will definitely be in the big cycle's bottom range, just not necessarily the absolute bottom.

Yesterday, BTC's lows breached the $60k mark, with both intraday lows and closing prices hitting lower levels than February 5th of this year. This gives us a solid angle to observe market sentiment and behavioral dynamics.

Most importantly, the Entity Adjusted Realized Loss (EARL) saw a 3-day average of $1.13 billion, which is nearly half of what it was on February 5th.

While this doesn’t guarantee we won’t see further dips, it marks a threshold where lower prices coincide with no higher EARL, indicating a classic 'bottom expectation' structure.

Additionally, in Chart 1, we see that the peaks of this cycle’s 1/2/3 are all lower than the previous cycle’s 1/2/3; this suggests that during extreme panic, the market appears to be more mature.

If EARL reflects the level of panic, then the Short-Term Holder Relative Unrealized Loss (STH-RUL) represents the psychological pressure faced by new investors. After all, they are the most sensitive to volatility and can significantly influence short-term price movements.

This is a normalized metric. The reason it is 'relative' is that it reflects 'the proportion of loss pressure relative to market size,' not the absolute loss amount.

From Chart 2, we can see that during the decline after entering a bear market, STH experiences a severe psychological limit that causes STH-RUL to instantly exceed +5 standard deviations, indicating a systemic crisis.

After this, even if prices drop lower, STH-RUL won’t surpass previous peaks again. This is because the chips have completed rotation in the high-loss zone, and new buyers have lower costs, allowing the market pressure to be digested.

Thus, during the bottom formation process, we use +2 standard deviations as the benchmark. When STH-RUL exceeds this line, it means we’ve entered a phase of extreme range.

Looking at both dimensions, EARL and STH-RUL provide a consistent signal: panic is being digested rather than spreading.

Prices are hitting new lows, but losses are not following suit—this has never been a sufficient condition for a bottom historically, but every real bottom has almost always displayed this characteristic.

Bottom formation is a process, involving repeated pressure and digestion, as chips rotate through panic until the new buyers' costs are low enough that prices lose their downward momentum.

What we are currently observing is the outline of this process.

We've hidden the BTC price curve from the 'cost basis of different coin ages' and just focused on the red/yellow/green lines, which seems clearer.

When the shortest-term cost line (red) crosses above the longest-term cost line (green), that's a signal that a trend is about to kick off.

From 2022 to 2025, this signal has appeared 4 times.

From the chart, we can see that May 2026 is the closest the red line has been to the green line after entering a bear market, and it's the closest to a trend reversal.

In previous analyses, we've often discussed whether it's a 'bounce or reversal', whether it's 'the end of the bear or a return of the bull'; what we're really waiting for is this signal.

Almost, but not quite a bull return...
How the red line moves next will determine how long the bear lasts.

One scenario is a major divergence like in April to June 2022, and the other is a minor divergence like in October to December 2022. The former corresponds to emotional capitulation and a waterfall drop; the latter corresponds to digesting divergences and wide fluctuations.

If it's the former, a recovery period of at least 6 months is needed; if it's the latter, 2-3 months will suffice.

Personally, I think the degree of divergence might fall somewhere in between or lean towards the latter.

Because, from the perspective of loss percentage, we're currently close to the limit; but we also need to consider the actual situation where the U.S. stock market is draining liquidity from the crypto space, leading to a continuous outflow of funds.

Can't say it's exactly the same, but the trajectory and patterns are indeed quite similar — this bear market's $BTC price relative to the 'STH cost basis model' compared to the last cycle (marked 1-4 in Chart 1).

If we're talking about a boat carving, then this time the pullback from 82 should end at the green line. If it breaks below that, then the carving fails.

Let's stretch the timeline back over the past 12 years (Chart 2), and we can see: the last time BTC broke below the green line was right at the tail end of the bear market (bear bottom or very close to it).

But actually, that's a false proposition! Because we can only see in hindsight to know which was the last time it broke below.

So, let's shift our thinking: if BTC really does find support at the green line this time, or consolidates between the green and blue lines, then the previous breakdown in February could potentially become the 'last one.'

Understanding it this way turns it from a false proposition into a probability proposition.

In most data, the average cost for a certain group of BTC holders is a relatively smooth curve. However, if there's a sudden spike or drop, it indicates a concentrated exit strategy.

In Chart 1, we see that on May 20, BTC retraced to around $76,000, and the average cost line for BTC held for 6-12 months suddenly dropped at a '90-degree angle', which is an unusual signal.

Based on the timeline, it appears that the chips purchased between May and November 2025 have changed hands, with a cost range between $85,000 and $125,000.

At the same time, we reviewed related data (Chart 2) and found that the BTC sold here has realized losses ranging from -38.2% to -23.6%.

'Held for nearly a year, averaging a 30% loss, cutting losses to exit...', from a psychological perspective, this is a form of capitulation—just can't hold on any longer.

From past data, when similar 'can't hold on' situations persist, it often signifies that a 'phase correction' is just around the corner.

It's been a real struggle...\n\nAfter around 20 days of STH-RP and TMMP dancing around, we finally see a solid death cross forming (the red line crossing below the green line).\n\nThat said, STH-RP (the red line) has been almost a straight line. This indicates that the chips at both ends of this average cost line aren't keen on trading hands anymore.\n\nThis aligns with our earlier point about the "short-term activity" dropping to rock bottom.\n\nHistorically, once a death cross occurs, BTC's price tends to be suppressed by the red line for quite a while (unable to break through), sometimes even dropping to new lows.\n\nIt sounds pretty scary, but! When we said it was a "real struggle" at the start, it's because there are some nuances compared to previous cycles.\n\nWhat’s different?\n\nThe slope of the STH-RP crossing is different! The steeper the slope, the stronger the willingness of holders at high positions to sell at a loss, which is why it’s suppressed and struggling to break through.\n\nThis time, the angle is nearly zero, meaning there’s not as much pressure, so breaking through shouldn't be that hard.\n\nOf course, STH-RP serves as an emotional line between bulls and bears; as long as the price stays below STH-RP, it’s short-term bearish. How the story unfolds from here is something only time will tell.\n\n(I personally think there might be different scripts.)

If we use the "short-term capital on-chain activity" metric as our gauge, which phase are we in right now? Three possibilities (highlighted in light yellow in the chart):

1. Bear bottom zone
2. Secondary bottom (with one last dip to go)
3. Accumulation before a breakout

The logic here is: it doesn’t necessarily mean that a "cooldown in short-term turnover" indicates a bear bottom, but rather that such low activity only occurs near a bear bottom.

In different cycles, varying environments, and different macro backgrounds leading to this situation, the market's expectations and pricing tend to be on the low side. However, as activity gradually picks back up, a repricing is inevitable.

Rationally speaking, we can temporarily exclude "Option 3" right now, but both 1 and 2 are still in play; therefore, I personally wouldn’t put all my capital on any single option. This is also the broad framework of my current trading strategy.

(Even if there’s one last dip, whether it breaks new lows or significantly drops is another topic altogether.)