With Bitcoin’s Monday Price Drop, Short-Term Holders Abandon Positions, and CME Open Interest Falls to a Record Low.

Bitcoin Capitulation on Monday Points to Possible Local Bottom as Short-Term Holders Exit

Monday’s steep decline in bitcoin prices is being interpreted by analysts as a potential local bottom, with a number of key indicators pointing to capitulation. Short-term holders of bitcoin, defined by Glassnode as those holding assets for less than 155 days, exited the market at a loss as prices dropped significantly. The drop also led derivative traders to close positions, resulting in a sharp decrease in open futures contracts on the Chicago Mercantile Exchange (CME).

Over 21,000 BTC ($2.2 billion) was transferred to exchanges by these short-term holders, marking the second-largest transfer of the month. Bitcoin’s price plunged by 4.7%, its biggest decline in two weeks, dropping to below $98,000. This move could reflect concerns among buyers who entered the market when prices were near record highs of $108,000 earlier this year, causing them to panic as the price slid back to five-digit levels.

These short-term holders, often newer investors or active traders, are highly sensitive to price volatility and tend to sell quickly when prices fall. The recent downturn followed concerns around Chinese startup DeepSeek, which cast doubt on the U.S.’s dominance in the AI and tech sectors.

Other signals of capitulation were seen across the market. The perpetual funding rates for BTC turned negative, signaling increased demand for bearish positions, which typically occurs when bitcoin nears a price bottom. Similar patterns were observed in previous instances such as January 13 and August 5, when bitcoin prices bottomed out.

The CME, often seen as a barometer for institutional activity, experienced a record drop in open interest (OI), with notional bitcoin OI falling by $2.4 billion (17,000 BTC). This significant drop in OI helped push the basis lower, according to Glassnode data.

Additionally, U.S.-listed bitcoin exchange-traded funds (ETFs) saw a major outflow of $457.6 million, a pattern that mirrors the outflows observed on January 13. This suggests that institutional investors are also pulling back amid the ongoing market volatility and uncertainty.