Bitcoin Demand Wanes: Bottom In or More Pain Ahead?

To figure out whether the market has bottomed, it really comes down to who's in control right now: conviction or capitulation. Currently, both technicals and on-chain data are starting to line up, though not in the way bulls would like.

From a technical standpoint, Bitcoin is down roughly 16% this week, which has clearly triggered a fresh wave of FUD, with price now testing the $60k support zone and showing strong risk-off momentum across the market. On-chain, that stress is starting to show up too. According to Santiment data, market sentiment was extremely bullish at late-May highs near $78k, peaking at +456 on the 22nd of May. It then flipped sharply as the price broke down. Sentiment bottomed at -164 on the 3rd of June and remains negative at press time. In simple terms, the crowd was most bullish at the top and most bearish into the drop. Classic.

Historically, BTC bottoms tend to form when buyers step in on weakness, basically dip buyers positioning early for future returns, especially around periods like Q3, which has been relatively strong for Bitcoin in past cycles. But such behavior isn't really showing up right now. Instead, Bitcoin demand has dropped to around 501k BTC, marking the deepest contraction of this cycle. To put this into perspective, Spot demand is down roughly -272k BTC (30-day sum), while Futures demand has also turned sharply lower at about -229k BTC. Put together, both Spot and derivatives are pointing to the same thing: demand is contracting hard right now, and this is one of the most significant drawdowns we've seen this cycle.

Against this backdrop, a confirmed Bitcoin [BTC] bottom still looks premature. With demand still contracting and selling pressure not fully absorbed, the market remains in a phase where capitulation hasn't clearly finished playing out. Instead, it may just be beginning. Conviction is fading even as the market enters historically key support territory.

On-chain data shows more than 50% of Bitcoin supply is now sitting at an unrealized loss, with around 10.5 million BTC underwater while only about 9.8 million BTC remain in profit. Historically, this kind of crossover has aligned with market bottoms, where weak hands are flushed out and long-term accumulation begins. However, accumulation signals aren't showing up this time around. Instead, investor patience is starting to get tested. According to Glassnode data, realized losses spiked to around $1.3 billion per day as BTC moved back toward $62k. Notably, LTHs accounted for $770 million of that, about 59% of total realized losses. In essence, cycle-top buyers who held through the drawdown are now starting to exit at a loss.

A similar signal is also emerging among short-term holders. According to CryptoQuant data, in the last 24 hours, 53.8k Bitcoin moved onto exchanges entirely from coins held at a loss, while profit-side inflows dropped to zero, marking the most lopsided loss-driven STH transfer of the year. Put together, the current Bitcoin setup clearly reflects capitulation, with weak conviction and rising underwater supply suggesting selling pressure may still be in the early stages.

As a result, BTC remains vulnerable here, with downside risk still open below $55k.