CryptoQuant on-chain analysis indicates Bitcoin is forming a market bottom through a mechanism termed "pain transfer," whereby accumulated losses migrate from short-term traders to longer-duration holders, a pattern typically preceding significant price reversals.
The analysis reveals that each new price decline is triggering progressively smaller unrealized losses among short-term holders as BTC transfers to new buyers at lower price points, gradually reducing their average entry cost. Simultaneously, unrealized losses are concentrating among investors who purchased near recent peaks and have held positions for more than 155 days, creating the conditions for capitulation.
This redistribution of losses—from weaker hands to stronger ones—is the core mechanism of bottom formation, according to the research. The process completes when short-term aNUPL (adjust Net Unrealized Profit/Loss) metrics return to neutral territory while long-term indicators stabilize, signaling exhaustion of selling pressure and potential market reversal initiation.