Recently, some institutions have been comparing the current market with Q1 2022. If you pull together several sets of data, it does have a bit of the same flavor of 'should we officially turn bearish.' The unrealized losses of BTC have accounted for a quarter of the total supply, with around 5–7M coins at a loss, peaking at 7.1M, which is almost synchronized with the figures from early 2022. If this position is broken, the locked-in losses will quickly expand, and the market will naturally slide deeper into a bearish trend.

The capital situation is also quite evident. In July this year, there was a monthly inflow of 64.3 billion, and now only 8.6 billion remains. Although it hasn't turned negative, the incremental funds can no longer support the previous high valuations. Long-term holdings are still being sold, but the profits are getting thinner, and we haven't entered a deep locked-in stage yet. Thus, many institutions now define the current phase as a 'digestion period before officially turning bearish in the second half.'

The macro pressure has also been increasing over the past two months, somewhat like the interest rate hikes in 2022; however, at that time, the impact was on OTC, while this time it affects the funding rhythm of spot ETFs. The market as a whole is gradually deleveraging. Liquidations are not so obvious, but leverage is indeed being gradually taken out, with funding rates remaining around 0 for a long time, leading to this kind of low directional decline.

As for altcoins, it goes without saying, they basically announced a retreat in advance. Memecoins have retraced about 66% from their highs in November, with the money almost entirely withdrawn. Project teams are now either washing the market or just hanging on. As before, altcoins always die first.

However, this round is not as extreme as 2022, as there is now a continuous structural buying force from ETFs, coupled with the absence of a 3AC type of shock that could blow up on-chain credit. The systemic risk is significantly smaller than in the previous round. Moreover, with the backdrop of a rate-cutting cycle, even if liquidity is not strong, it is unlikely to experience a direct and abrupt collapse.

Overall, a major drop may not necessarily occur, but a market characterized by 'low volatility, slow decline, and dragging on for a long time' is more likely to persist until late 2026!~