The Aftermath of the Bybit Hack: Bitcoin’s Volatile Landscape
Bitcoin has recently found itself at the center of a storm—one sparked by the Bybit hack that sent shockwaves through the crypto community. In the days following the hack, a notable wave of panic selling from short-term holders (STHs) altered the dynamics of the market. This selling frenzy not only caused a sharp decline in Bitcoin’s price but also raised intriguing questions: Is this sell-off signaling a local bottom for BTC? Let’s unpack the market indicators and explore what these movements could imply for Bitcoin’s future.
Panic Selling by Short-Term Holders (STHs)
The Bybit hack was a pivotal event that led many short-term Bitcoin holders to react hastily, selling off their holdings as they faced significant losses. In the immediate aftermath, the price of Bitcoin took a noticeable dip, falling to $96,259.9—a decrease of 0.12% from the previous period. This downturn was reflected in several technical indicators on the 4-hour chart, which displayed a decidedly bearish sentiment permeating the market.
Adding to the concerning signals, the Exponential Moving Average (EMA) indicated a troubling crossover, with the 9-period EMA slipping below the 26-period EMA, suggesting a potential short-term downward trend. Meanwhile, the Relative Strength Index (RSI) sat at 46.05, hinting at a neutral yet slightly bearish outlook. Typically, RSI readings between 30 and 50 indicate a market in consolidation with no clear overbought or oversold signals. However, a rebound above the 50 mark could potentially indicate the beginnings of a recovery.
Capitulation and Local Bottom
Amidst the chaos, the Short-Term Holder Profit & Loss (P&L) to Exchanges Sum chart painted a stark picture. Following the Bybit news, there was a significant prevalence of red bars on the chart, signifying massive losses for short-term holders, particularly in the $90K to $95K range. This capitulation—where distressed traders offload their positions—often serves as a crucial marker for the end of a sell-off period. Historically, this type of behavior has coincided with the formation of local bottoms, creating a foundation from which the price can potentially bounce back.
Interestingly, a similar pattern was observed in early 2022, when BTC’s price experienced notable recovery following a wave of realized losses. This trend suggests that as traders move past their panic, a new buying phase may emerge, inviting long-term holders back into the marketplace.
Liquidity Shift and Reduced Selling Pressure
Examining Bitcoin’s liquidity further amplifies the current market narrative. The 90-day active supply of Bitcoin has been on the decline, diminishing from approximately 6 million BTC in late 2024 to around 4 million BTC by early 2025. Such a downward trend in active supply often correlates with lesser trading activity and may indicate waning interest from short-term traders who are quick to react to events like the Bybit hack.
Historically, similar declines in active supply have preceded price stabilization. The comparison to 2018 is worth noting, as that downturn eventually led to a more stable Bitcoin price. This suggests that the selling pressure currently being exerted by short-term holders might be on the verge of subsiding, opening the door for future recovery.
Netflows and Potential for Recovery
In addition to the waning active supply, Bitcoin’s exchange netflows tell an encouraging story. Over the past 24 hours, there has been a notable outflow of -546.11 BTC, contrasting with the previous weeks of positive net inflows. Large withdrawals from exchanges generally signify reduced selling pressure, as many holders choose to transfer their Bitcoin into off-exchange wallets for long-term holding.
This behavior mirrors a trend we saw in mid-2021, where significant outflows from exchanges preceded notable price recoveries. Furthermore, a 24-hour netflow change of +269.71 BTC indicates a renewed interest in buying, which hints at a shifting market dynamic that could push towards a recovery phase.
Looking Ahead to Bitcoin’s Future
As Bitcoin navigates through this period of short-term volatility, the juxtaposition of panic selling and shifting liquidity dynamics culminates in an interesting moment for the digital asset. The historical context surrounding capitulation events suggests that the market often seeks to stabilize following these downturns. The reduced selling pressure from STHs, coupled with indications of accumulation, could provide the necessary groundwork for Bitcoin’s next upward movement.
While the immediate future may still be fraught with volatility, the underlying indicators offer a glimmer of hope for potential recovery. Traders and enthusiasts alike are keeping a keen eye on the developments within the market, eager to see how Bitcoin will respond in the days and weeks to come.
