Bitcoin’s on-chain signals have shifted in a way that several researchers say signals capitulation could be underway, potentially setting the stage for a cycle bottom. The most studied metric — the short-term holder stress — has sunk to levels not seen since the late-2018 bear market trough, according to data from Checkonchain. The indicator measures the gap between the spot price and the average cost basis of wallets holding coins for under 155 days, applying Bollinger Bands to identify oversold conditions. Traders and researchers see the print as aligning with prior macro bottoms, though consensus on timing remains mixed. The conversation also points to macro liquidity catalysts: Wells Fargo cites tax refunds in 2026 as a possible tailwind that could pour liquidity into Bitcoin and equities by March, potentially absorbing remaining selling pressure. The path forward will hinge on whether market participants sustain buying interest as on-chain stress remains subdued across multiple cohorts, including short-term holder wallets.

Key takeaways

• Bitcoin’s Short-Term Holder (STH) MVRV Bollinger Band indicator has moved into its deepest oversold territory since the 2018 bear market bottom, signaling potential capitulation pressure.
• Historical precedents show similar oversold prints preceding substantial rallies, including a roughly 150% gain within a year and a 1,900% surge over three years after the 2018 bottom.
• The November 2022 trough, which preceded a multi-year rally to a record high near $126,270, is cited as another data point supporting cycle-bottom expectations.
• Realized losses among short-term holder whales have remained muted since Bitcoin’s October 2025 peak near $126,000, suggesting larger buyers have not yet fully capitulated.
• Macro liquidity signals, such as Wells Fargo’s note on sizable 2026 tax refunds potentially fueling a “YOLO” trade into Bitcoin and equities, could provide near-term upside pressure if flows materialize by end-March.

Tickers mentioned: $BTC

Sentiment: Neutral

Price impact: Neutral. While on-chain stress hints at a potential bottom, there is noConfirmed breakout scenario described and macro factors remain a key variable.

Market context: The combination of on-chain stress relief and a potential liquidity impulse from tax flows frames a window where risk appetite could improve in the near term. observers are watching whether the inflows materialize into persistent demand, or whether price action remains range-bound as macro conditions evolve.

Why it matters

On-chain metrics have long been a yardstick for evaluating Bitcoin’s market cycle phases, distinct from price action alone. The Short-Term Holder MVRV Bollinger Band approach temporarily puts a spotlight on coins held by newer entrants, treating them as a proxy for imminent selling or hold-to-maturity behavior. When the oscillator breaks below its lower Bollinger Band, it suggests that the average cost basis of short-term holders is being undercut by the current price — a condition historically associated with capitulation in the broader market. The 2018 experience, where oversold prints preceded a multi-year uptrend, is frequently cited by analysts as a potential template for this cycle.

The depth of the current oversold reading is meaningful because it aligns with a broader narrative: that selling pressure could be waning as investors capitulate, potentially creating room for a sustainable bottom. Yet, the analysis cautions that such signals are not guarantees. Bitcoin’s price has previously rebounded from similar conditions only to face renewed headwinds from macro shocks or shifts in risk appetite. The discussion around realized losses among short-term holder whales adds nuance: even as prices have fallen, large holders have not uniformly capitulated, suggesting that demand may still exist at higher levels than recent prices imply. This balance matters because it influences the probability of a durable bottom versus a quick bounce that fails to gain traction.

The macro dimension adds another layer. Wells Fargo’s strategists highlighted the potential for tax refunds to unlock liquidity that could support risk-on assets, including Bitcoin, by injecting capital into the market through March. If the $150 billion figure referenced by analysts proves accurate, such inflows could mitigate selling pressure and help price discover a more meaningful bottom. The convergence of on-chain signals with real-world liquidity flows is the kind of alignment that market watchers view as a constructive sign for risk assets, even as they remain cautious about the pace and durability of any rebound.

Analysts also point to historical cycles where bottoms were followed by notable recoveries. The late-2018 experience showed that oversold conditions, when paired with improving macro sentiment and increasing demand from new buyers, could catalyze a multi-year upside. The November 2022 bottom, followed by a surge to near-record highs, reinforces the idea that bottoms often coincide with periods of intense buyer interest returning to the market, even if the path there is bumpy. In this environment, the emphasis is on how fast new money and existing holders re-enter the market and how quickly sellers exhaust their supply, factors that are inherently linked to broader liquidity and sentiment dynamics.

Within the broader ecosystem, some traders and researchers also reference a smell-test of market psychology: the extent to which realized losses have cooled among the most active short-term participants suggests that the willingness to re-enter at higher levels remains present, albeit tentative. This is why the current data is interpreted as a potential setup for a cycle low rather than a guaranteed bottom. The shared takeaway is that while the signals are promising, the next few weeks — especially through the end of March — will be telling as tax-driven liquidity and on-chain dynamics continue to unfold.

The discussion around these dynamics is not isolated to Bitcoin. While the primary focus is on the flagship asset, the pattern of on-chain stress, macro liquidity, and historical analogs feeds into broader debates about the resilience of the crypto market amid evolving market structure and regulation. As always, readers are advised to view these signals as parts of a larger puzzle, not a definitive forecast. The intersection of on-chain data, fund flows, and macro risk sentiment remains the most informative lens for assessing where Bitcoin might head next.

What to watch next

• Monitor whether Bitcoin price stabilizes or rallies in the coming weeks, particularly if the STH Bollinger Band reading remains in oversold territory or begins to recover.
• Track tax-related liquidity flows into markets through March, as discussions around the $150 billion potential influx gain visibility.
• Observe changes in realized losses among short-term holder wallets and any signs of capitulation shifting toward distribution or accumulation phases.
• Watch updates from on-chain analytics providers like Checkonchain for new readings on short-term cost bases and holder behavior.

Sources & verification

• Checkonchain on the Short-Term Holder (STH) Bollinger Band metric and its historical precedents.
• Past Bitcoin bottoms in 2018 and 2022 that preceded major rallies, including a move to about $126,270 in 2022.
• Bitcoin price context around the October 2025 peak near $126,000 and the persistence of muted realized losses among short-term holder whales.
• Wells Fargo analysis cited by CNBC, noting potential liquidity inflows from tax refunds in 2026 and their possible impact on Bitcoin and equities.
• Matrixport’s bottom outlook as part of the broader analyst consensus around on-chain signals and macro risk sentiment.

Bitcoin on-chain stress signals edge toward potential cycle bottom

Bitcoin (CRYPTO: BTC) on-chain metrics have shifted in a way that several researchers say signals capitulation could be underway, potentially setting the stage for a cycle bottom. Foremost among them is the Short-Term Holder (STH) MVRV Bollinger Band indicator, which dipped into levels not seen since the 2018 bear trough, according to data from Checkonchain. By applying Bollinger Bands to the gap between the spot price and the average cost basis for wallets that have held BTC for less than 155 days, the oscillator flags oversold conditions when the price trades beyond the lower band.

The pattern mirrors a historical playbook: when the STH oscillator crosses the lower Bollinger band, Bitcoin has tended to trade well below the average purchase price of recent buyers, signaling capitulation pressure that often precedes a multi-month or multi-year rebound. In late 2018, such an oversold print foreshadowed a substantial rally, with BTC staging roughly a 150% ascent within a year and a cumulative rise of about 1,900% over three years. Similarly, the November 2022 trough marked a turning point before a dramatic upleg toward a record high near $126,270. These episodes illustrate how on-chain stress and market cycles can align in the aftermath of stress events.

Beyond price gaps, the market’s on-chain composition offers a nuanced view: realized losses among short-term holder whales have remained muted since Bitcoin’s October 2025 peak around $126,000, implying that larger buyers may still be sitting on loss-adjusted positions rather than capitulating. This balance between buying pressure and seller fatigue is often critical for confirming a bottom rather than a simple bounce. The data point is echoed in other analyses showing that demand from new entrants and opportunistic buyers has not yet faltered, though the overall macro environment remains uncertain.

Macro traders are also watching liquidity catalysts that could influence near-term direction. Wells Fargo’s Ohsung Kwon, cited by CNBC, highlighted that unusually large tax refunds anticipated in 2026 could revitalize what some call a “YOLO” trade — a rapid, all-in bet across equities and digital assets. Estimates floated in the note suggest as much as $150 billion could flow into stocks and Bitcoin by the end of March, a wave that may help absorb remaining selling pressure and support a stabilization narrative through the first quarter. More details

Such liquidity inflows would not, by themselves, guarantee a sustained rally, but they could dampen downside volatility and create a backdrop for a gradual rebound if on-chain metrics continue to show exhaustion of sellers. The discussion around short-term holder metrics is complemented by institutional commentary and analyst forecasts that point to a potential cycle low rather than a simple bounce. Some market observers, including researchers tracking long-run cycles, emphasize that the bottom’s timing is intrinsically linked to how quickly buyers re-emerge and how macro risk sentiment evolves in the coming weeks.

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TLDR:

• Prediction markets show a 60% Republican Senate and 83% Democratic House probability in 2026 elections.
• The GENIUS Act, enacted in 2025, awaits full implementation within 12 to 24 months after the midterms.
• ERC20 stablecoin supply surpassed $150 billion in 2024, approaching highs last seen during the 2021 cycle.
•  A divided Congress points to gradual regulatory clarity, favoring steady capital inflows over sudden market shifts.

The 2026 U.S. midterm elections are drawing close attention from crypto markets worldwide. At the center of that attention is the GENIUS Act, a landmark stablecoin law enacted in 2025.

Prediction markets currently show a 60% probability of Republican Senate control and an 83% probability of Democratic House control.

That split points to a divided Congress as the most likely outcome. For crypto markets, this political structure could determine how quickly regulatory clarity translates into capital movement.

Why the Midterm Election Outcome Matters for Stablecoin Regulation

The 2026 midterms carry direct consequences for how the GENIUS Act moves toward full implementation. Enacted in 2025, the law established the first federal framework governing stablecoins in the United States.

Full implementation is expected to arrive within 12 to 24 months following the November 2026 elections. The political composition of Congress after that vote will influence how smoothly that process unfolds.

A divided Congress, the current base case, reduces the probability of sudden or sweeping regulatory reversals. Instead, markets can expect incremental policy progress as implementation details surface over time.

This gradual approach allows institutions and traders to adjust their positioning steadily. It also lowers the risk of abrupt disruption to existing market structures built around stablecoin liquidity.

“Regulation does not follow price—it reshapes the conditions under which price forms.” — XWIN Research Japan

Broader legislative efforts, such as the CLARITY Act, face a harder path under split congressional control. Without a unified legislative majority, comprehensive digital asset market reform may move slowly.

Crypto participants should therefore expect a multi-year regulatory window rather than a single decisive moment. Each phase of implementation will carry its own market repricing effect.

The midterms will not produce an overnight transformation in crypto markets. However, they will set the regulatory tempo for the following two years.

That tempo matters enormously for institutional capital planning cycles. A stable, predictable regulatory environment consistently attracts longer-term capital commitments into digital asset markets.

Stablecoin Supply Data Points to a Liquidity Cycle Already in Motion

On-chain data from CryptoQuant shows that the ERC20-based stablecoin supply has exceeded $150 billion as of 2024. That level approaches the historical highs last recorded during the 2021 market cycle.

Stablecoin supply functions as the most direct available measure of crypto market liquidity. When supply expands at this scale, it signals that capital is being staged ahead of broader risk allocation.

📊 CryptoQuant data confirms total ERC20 stablecoin supply surpassed $150 billion in 2024, nearing all-time highs.

Historical market patterns show that stablecoin supply growth has consistently preceded major bull cycles. The current supply level suggests that liquidity is already structurally present across the market.

This condition holds even as short-term volatility continues to affect crypto asset prices. Markets have historically used such periods of elevated liquidity to absorb risk before moving higher.

The combination of the GENIUS Act’s regulatory timeline and current supply data creates a specific market setup. Liquidity appears to be accumulating well ahead of the formal regulatory catalyst the midterms may deliver.

If divided government produces gradual clarity as expected, markets could reprice steadily throughout the implementation window.

That measured repricing environment tends to support sustained capital inflows rather than short-lived speculative spikes.

Ultimately, the 2026 midterms may not reshape crypto markets through legislation alone. Their larger role may be confirming the regulatory environment under which the next liquidity cycle accelerates.

The stablecoin supply structure already suggests that a foundation is forming. The election outcome will determine how quickly that foundation translates into the next market phase.