Bitcoin has always been a fascinating asset, marked by periods of explosive growth and sharp corrections. Yet, the current phase in Bitcoin’s journey reveals a unique and complex dynamic that sets it apart from previous cycles. By examining the behavior of long-term holders, institutional inflows, and macroeconomic influences, we can better understand why this moment could be pivotal in Bitcoin’s history.
Long-Term Holders: The Smart Money Taking Profits
A striking feature of the current Bitcoin market is a significant spike in profit-taking by long-term holders—investors who have held Bitcoin for years. Recently, these experienced holders booked over a billion dollars in profits, an event that has only happened five times in the past decade. Historically, these spikes often occur near local price tops and precede at least a 30% price correction. In two notable cases, these spikes even marked the peak of entire bull markets.
This behavior has earned long-term holders the moniker “smart money” for their consistent ability to exit before major downturns. The current spike, therefore, could suggest that long-term investors are preparing for some level of correction or are protecting gains after an extended rally.
Contrasting Signals: Institutional Inflows Surge
On the flip side, institutional investors are pouring capital into Bitcoin at an unprecedented scale, notably through Bitcoin Exchange-Traded Funds (ETFs). Over the past 10 weeks, these inflows have totaled a staggering $13.5 billion compared to a mere $200 million in outflows. This represents nearly 70 times more money flowing into Bitcoin than out.
These inflows come from entities such as registered investment advisers, pension funds, and hedge funds. The last time inflows were of this magnitude was in October 2024, a period that preceded a massive 70% rally in Bitcoin’s price after a sustained consolidation phase.
So, while long-term holders are taking profits, institutions are aggressively buying. This divergence raises the question: Which group is setting the right tempo for Bitcoin's future?
Stock Market Rally and Bitcoin’s Correlation
To answer that, it helps to understand Bitcoin’s relationship with broader financial markets, particularly the US stock market. Since its bottom in April this year, the US equities market has surged almost 30%. Bitcoin’s price throughout this bull run since late 2022 has closely mirrored the trajectory of US stocks.
Some analysts warn that the stock market rally—a classic V-shaped rebound—is prone to short-term exhaustion and a possible pullback ranging from 7% to 10%. Historically, following similar rebounds in 2019 and 2020, the stock market saw these corrections, which could translate into some selling pressure for Bitcoin. However, Bitcoin’s responses to these stock market pullbacks have not been uniform.
In 2020, Bitcoin experienced a mild 7% correction before launching into a meteoric 500% rally over the following year. In 2019, it sidestepped the stock market pullback entirely and instead continued climbing as risk-on speculative assets gained favor. This flexibility in Bitcoin’s reaction suggests that it can both decouple from and follow equities depending on broader investor sentiment.
The US Dollar’s Role: Major Weakness as a Tailwind
Another macro factor working in Bitcoin's favor is the sharp weakness in the US dollar index, which has fallen by about 12% since January 2025—the most significant drop since 2020 and 2017, both years that aligned with major Bitcoin bull runs.
Historically, Bitcoin prices have tended to rise when the US dollar weakens and fall during dollar strength. This inverse relationship highlights Bitcoin’s status as an alternative asset and a potential inflation hedge, making the dollar’s current decline a strong positive signal for Bitcoin.
A Valuation Model Reveals Bitcoin’s Divergence
Bringing these elements together, some analysts have developed valuation models incorporating US stock market performance and the US dollar index to predict Bitcoin’s expected returns. Comparing Bitcoin’s actual six-month returns to this model reveals notable discrepancies.
Currently, the model suggests Bitcoin should have gained roughly 150% over the past six months based on macro conditions. However, Bitcoin’s actual gain in the first half of 2025 has been a modest 15%, creating a significant undervaluation gap.
Such gaps have appeared only twice before in the past decade—in early 2023 and late 2020—both of which preceded substantial rallies. This pattern suggests Bitcoin’s current undervaluation could foreshadow a powerful upward movement as the market adjusts.
Decoding the Profit-Taking Spike
Revisiting the long-term holder profit-taking spike, analysis of previous instances reveals that these spikes did not immediately coincide with market peaks in four out of five cases. Instead, they often occurred well before final bull market tops, during the latter stages of Bitcoin run-ups that still saw further price appreciation afterward.
Therefore, the current spike in profits does not necessarily indicate an imminent downturn. Rather, it may signal that Bitcoin is in the later phases of its bull market cycle, absorbing selling pressure even while institutional buying continues robustly.
Conclusion: A Moment Unlike Any Other
This confluence of factors—experienced investors booking profits, heavy institutional inflows, a strong stock market alongside a weak US dollar, and a valuation model indicating undervaluation—makes this moment in Bitcoin’s history uniquely complex.
While caution is warranted given historical patterns of profit-taking before corrections, the broader macroeconomic context and institutional interest suggest significant upside potential remains. This dual narrative of selling and buying, caution and optimism, positions Bitcoin in a place that defies simple categorization.
For investors and analysts alike, understanding this nuanced environment is key to navigating what could be one of the most distinctive phases in Bitcoin’s ongoing evolution.
Note: This article is for informational purposes only and does not constitute financial advice.
By Wolfy Wealth - Empowering crypto investors since 2016
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Disclosure: Authors may be crypto investors mentioned in this newsletter. Wolfy Wealth Crypto newsletter, does not represent an offer to trade securities or other financial instruments. Our analyses, information and investment strategies are for informational purposes only, in order to spread knowledge about the crypto market. Any investments in variable income may cause partial or total loss of the capital used. Therefore, the recipient of this newsletter should always develop their own analyses and investment strategies. In addition, any investment decisions should be based on the investor's risk profile.
