Bitcoin Nears $65K, But Two Investor Groups Are Selling Into the Rally – Here's Why

Bitcoin surged toward $65,000 after softer-than-expected U.S. inflation data, but on-chain signals reveal two key investor groups are selling into the bounce, potentially capping further upside.

Long-Term Holders Capitulating

Long-term holders (wallets holding BTC for at least 5 months) who bought near last year's highs are using the relief rally to sell at a loss rather than hold through deeper drawdowns. This behavior signals a lack of confidence in the sustainability of the price rise.

Short-Term Holders Taking Profits

Short-term holders who accumulated near recent lows are now realizing profits at a pace exceeding $4 million per day, reminiscent of May's selling wave when BTC briefly hit its 200-day average above $82,000.

Simultaneous Selling Creates Overhead Supply

The result: both groups selling simultaneously is likely creating overhead supply exactly as the market tries to break higher. Analysts note that "conviction remains shaky" among those still underwater from earlier in the cycle.

"As price rallies toward $66k, LTH realized loss volume is spiking! Cycle-top buyers are using the relief rally as an exit opportunity, locking in losses at a smaller margin than the sub-60k lows allowed."

Inflation Data: A Double-Edged Sword

BTC jumped from $61,500 to nearly $65,000 after June's CPI came in at 3.5% YoY (below the 3.8% consensus) and PPI also missed expectations. This eased fears of Fed rate hikes, sending the dollar index lower and Treasury yields down.

However, some analysts warn the data may be obsolete. The 3.5% CPI was driven by a 10% drop in gasoline through June, but oil prices have since rebounded to one-month highs amid escalating geopolitical tensions.

"Markets are rallying on a June photograph, while July develops differently, and the July print will be the first to carry the war premium." – Ryan Lee, Bitget

Caution Amid Geopolitical Risks

Wintermute OTC trader Jasper De Maere also urged caution, noting that while the inflation data is constructive, the backdrop remains uncertain with U.S. strikes on Iran continuing and the Fear & Greed Index only moving from 22 to 25 (still Extreme Fear).

"One soft CPI print against an active military escalation is not the same as a durable regime shift in risk appetite."