Bitcoin has once again reminded investors that corrections are part of its journey, not the end of it. After reaching a historic peak near $125,000 in October, the price has since pulled back by roughly 27%, trading around the $90,000 region. At first glance, this drop may look alarming, especially to newer market participants. But a closer look at onchain data tells a more balanced and insightful story. Despite the decline, a large portion of bitcoin holders remain in profit, suggesting that the current phase is more of a cooling period than a full market breakdown.
Two Thirds of Bitcoin Supply Still in Profit
One of the most important metrics supporting this view is the Supply in Profit indicator. This measure tracks the percentage of Bitcoin supply that is currently trading above its acquisition price. According to data from market analytics firm Adler AM, about 67% of bitcoin supply is still in profit. This is a critical observation because it shows that most holders are not underwater, even after a sharp correction. Historically, true market capitulation tends to occur when this metric drops below the 50% level. For now, bitcoin remains well above that danger zone.
To understand why this matters, it helps to look back at previous market cycles. During the 2023 market bottom, the supply in profit metric fell to around 46%. That period was marked by deep fear, forced selling, and widespread pessimism. By contrast, the current 67% level signals that selling pressure is present but not overwhelming. It suggests a market that is digesting gains rather than collapsing under stress. In simple terms, many investors still have a buffer of profit, which reduces the urgency to sell at a loss.
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Why This Looks Like a Correction, Not a Bear Market
The current situation also resembles the early stages of the 2022 correction rather than a full blown bear market. Back then, bitcoin experienced a prolonged pullback that unfolded in phases, not in a single dramatic crash. The present data echoes that pattern, where price weakness is met with gradual stabilization rather than panic driven exits. This context is important because it helps investors frame the correction as part of a broader market structure instead of a sudden reversal of the long term trend.
Another key insight comes from drawdown analysis. After peaking at $125,000, bitcoin experienced a maximum drawdown of about 35% before beginning to recover. That drawdown has since narrowed to roughly 27.6%. While the price is still below its high, the reduction in drawdown suggests that selling pressure is easing. Even more encouraging is the behavior of short term moving averages, particularly the one week simple moving average, which has started to turn upward. This shift often signals that momentum is stabilizing and that a local base may be forming.
Market tops are usually characterized by extreme profitability across the supply. In past cycles, bitcoin tops often occurred when more than 90% of supply was in profit. At those levels, optimism tends to be excessive, and even small shocks can trigger sharp reversals. Today, with the profit supply sitting at 67%, the market is far from those overheated conditions. This reinforces the idea that the recent decline is a correction within an ongoing cycle rather than the final peak of the market.
Price action since November also supports this interpretation. After a sharp correction, bitcoin has shown signs of stabilization, with price moving sideways and finding support rather than continuing to fall aggressively. This behavior reflects a balance between sellers taking profit and buyers stepping in at perceived value levels. When combined with onchain metrics, it paints a picture of a market attempting to reset and rebuild momentum.
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What Could Change the Outlook
Risks still exist, and it is important not to ignore them. The 50% level on the supply in profit metric remains a key line to watch. If market conditions worsen and this metric falls below that threshold, it could signal a shift toward deeper bearish pressure. In such a scenario, more holders would be underwater, increasing the likelihood of forced selling and stronger downside moves. For now, however, the data suggests that this risk has not materialized.
Macroeconomic factors also play a role in shaping near term price behavior. Interest rate expectations, liquidity conditions, and global risk sentiment continue to influence bitcoin and other digital assets. Periods of uncertainty often lead to reduced risk appetite, which can weigh on price even when onchain fundamentals remain healthy. This explains why bitcoin can experience sharp pullbacks without corresponding signs of structural weakness in the network.
The Big Picture for Bitcoin
For long term investors, the current environment offers an important lesson in perspective. Bitcoin has a history of sharp corrections within broader uptrends. Drops of 20% to 30% have occurred many times in past cycles, often shaking out weak hands before the market resumes its advance. The fact that two thirds of supply remains in profit suggests that long term holders are largely intact and that confidence has not been fully broken.
This phase can be described as a test of conviction rather than a collapse of belief. Investors who understand bitcoin’s cyclical nature tend to view such corrections as periods of consolidation. They allow excess leverage to unwind and give the market time to build a stronger foundation. From this angle, the recent pullback may actually strengthen the market by reducing speculative excess.
As time goes on, much will depend on whether bitcoin can maintain its current support levels and whether onchain metrics continue to hold above critical thresholds. If the supply in profit remains above 50% and moving averages continue to trend upward, the probability of a sustained recovery increases. On the other hand, a sharp breakdown in these indicators would suggest that the correction has further to run.
In the short term, volatility is likely to remain high as the market searches for direction. Traders may continue to react to headlines and macro signals, while long term participants focus on structural data.
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Victor Solomon is a crypto analyst at Crypto Asset Buyer (CAB). Over the years, Victor has gained valuable expertise in market analysis, risk management, and community management within the cryptocurrency ecosystem. The founder of Soluvic Crypto Hub, a crypto community where he equips newbies in the space, Victor’s mission is to empower individuals to uncover opportunities and safely navigate risks in the blockchain industry. Victor’s academic foundation includes a BSc. (Ed) in Mathematics, a credential that underpins his strong analytical and problem-solving abilities. Currently, he is expanding his technical expertise as a Software Development student at Brigham Young University. He is an Ex African Manager of Newscrypto.
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