Author: @BlazingKevin_, the Researcher at Movemaker

As the open interest in Bitcoin rises and key price points on the liquidation map continue to be reinforced, the divergence in the market begins to intensify further. Is the current situation a rebound turning into a reversal, or a second distribution in a downward continuation?

This is the author's observation from the market regarding two mainstream views on future trends, both of which have considerable analyst support. The two perspectives start from completely different data and angles, but a careful examination of their core reasoning reveals that they ultimately converge. Both perspectives are based on an analysis of supply and demand. Therefore, today's discussion will analyze how the views on reversal and second distribution stem from the same root, that is, both start from analyzing supply and demand, yet arrive at completely different conclusions.

Candlestick charts represent price movements and are the most visual representation of supply and demand relationships. The ebb and flow of buying and selling intensity constitute the price's upward and downward fluctuations. Each candlestick's formation is the result of the confrontation between buyers and sellers, serving as a compressed image of changes in supply and demand structure. Furthermore, buying and selling have intensity, which can be intuitively observed from trading volume. If we think further, why do prices fluctuate? Why do they retrace at certain levels? Why do breakouts sometimes fail?

Here, the author shares a marble theory to facilitate the explanation of the changing influence of tariff policies and the formation of momentum when supply and demand change. The marble theory is a way to concretize the abstract supply and demand relationship. The narrow definition of supply and demand can be easily seen on the order book, where different order volumes create varying thicknesses of glass, and each actively executed trade is a momentum marble. The process of price change is essentially the continuous impact of these marbles on the order book, breaking through the glass and pushing the price forward.

The thickness of the glass represents the liquidity depth and order density at a certain price level; the marble's momentum comes from the volume and speed of active buying or selling. Each advance in market price is the result of a marble breaking through a layer of glass, causing the price to leap to the next layer. If the momentum is strong, it may break through multiple layers of glass; if the momentum is insufficient, it may get stuck at a certain layer or even be rebounded. During periods of extreme market volatility, switching to a 1-minute timeframe reveals such marble-like trading breakouts.

This can explain the unpredictability of price in a short time frame, as it can be seen as chaotic movement between two layers of thick glass. Compared to "price trends," the marble theory emphasizes "causal structure"; compared to predicting candlesticks, the marble theory attempts to restore the physical process of price being pushed. This is a more fundamental analytical approach to the market. From the appearance of candlesticks, combined with time and trading volume, countless trading indicators can be derived. Most of these indicators are not part of today's discussion, but those involving supply and demand relationships will be mentioned in the following content.

Based on the marble theory, the following abstractions can be derived:

Order thickness = Depth at a certain price level

Active trading = Marble

Trading volume = Marble's momentum

Impact cost = Energy loss of the marble penetrating the glass

Based on this reasoning, the following hypotheses can be further derived:

Market prices do not move continuously, but rather "break through" one price range after another;

The order density at different price levels varies, and the differences in thickness create support and resistance;

The larger the active trading, the stronger its momentum, capable of pushing prices through more "glass layers";

Some orders in the market represent "false liquidity", not reflecting true intentions; marbles hitting this type of glass may result in false breakouts;

Price behavior has inertia; when momentum is too strong, it may lead to prices "breaking through too far," resulting in overheating or overcooling phenomena, namely overbought or oversold conditions.

This is the theory the author has derived from two viewpoints and from personal trading experiences. In making a trade, one can simply look at the candlesticks, as all supply and demand relationships are hidden within them. If one's trading level is high enough, one can determine the direction of supply and demand and manage the arrival of critical points just by looking at the candlesticks. Experts simplify complexity; candlesticks are sufficient.

Here are two simple examples: A long bullish candlestick usually indicates that buying power dominates during that period, with demand continuously rising and absorbing orders, strongly breaking through multiple layers of "glass"; whereas a long bearish candlestick reflects a suppressive dominance of supply, with weak buying support, causing prices to rapidly break through multiple support levels, with the marble's momentum stemming from strong selling intentions.

If observing the candlesticks does not reveal the supply and demand relationship, more indicators may be needed for assistance, such as open interest, spot premium conditions, and liquidation maps, to find supportive data for one's trading from multiple angles. Whether the rebound strengthens into a reversal or is a second distribution in a continuation is concluded based on their respective perspectives. The former believes that demand exceeds supply, while the latter believes that supply exceeds demand. More directly, the former believes the bull market is still ongoing, while the latter believes the bear market has begun and will continue to deepen. From a sensory perspective, more people are optimistic about the rebound turning into a reversal, meaning more believe the bull is still present. Therefore, I will first introduce the theoretical basis of the first viewpoint.

First Viewpoint: The Rebound is Likely to Turn into a Reversal

The first viewpoint can be roughly categorized into three different situations where demand exceeds supply, discussing the relationship between long-term holders (LTH) and short-term holders (STH) as well as the supply relationship in dense chip areas, drawing from @Murphychen888, whose viewpoints will be extensively used in the following text.

First is the relationship between long-term holders (LTH) and short-term holders (STH). The transition of profit and loss states between LTH and STH often signals important market turning points. The first sub-point is to observe changes in the long-term holder profit and loss ratio (LTH-RPC) to capture market bottom signals. When this indicator shows that long-term holders begin to experience widespread losses, it often means the market is approaching a phase low.

The principle of the indicator is:

1. When the profit ratio of long-term holders significantly declines and losses appear, it means the realizable profit space has been greatly compressed.
2. The persistence of loss states will suppress the willingness to sell; as the sellable chips decrease, market selling pressure will gradually weaken.
3. When selling momentum exhausts to a certain extent, the market naturally forms a price bottom.

Historical data supports this:

• At the bottoms of the bear markets in 2018 and 2022, the proportion of long-term holders' loss chips reached the range of 28%-30%.
• In the extreme market conditions of March 2020, this indicator also climbed to around 29%.
• During bull market cycles, when this ratio reaches 4%-7%, it usually corresponds to the low point of adjustment.

Current market characteristics show:

• The proportion of long-term holders' losses has risen from nearly zero to 1.9%, approaching levels seen in July 2024.
• Considering that Bitcoin purchased at a cost of $90,000 to $100,000 by the end of 2024 to early 2025 is about to turn into long-term holdings (currently in a floating loss state), this ratio is expected to continue rising.
• When the loss proportion enters the threshold range of 4%-7%, more definitive layout opportunities will emerge.

When the vast majority of long-term holders are in a profit state, each price rebound will trigger profit-taking, creating continuous downward pressure. Historical experience shows that whether at bear market bottoms or bull market corrections, when long-term holders generally turn to a loss state, it often means the market is about to bottom out. At this point, selling momentum has been fully released, and the unsustainable selling pressure will prompt prices to stabilize and rise. Although there are signs of some long-term holders "surrendering" in the current market, from a timing perspective, it still belongs to the left-side layout stage, but the potential return rate may be considerable.

The second sub-point is the STH-RPC, the profit and loss ratio of short-term holders. Unlike observing long-term holders experiencing losses and entering from the left side, the profit and loss ratio of short-term holders is a right-side entry signal, proving that current demand far exceeds supply.

Indicator principle:

• When new short-term participants in the market gradually shift from loss to profit, it usually means overall confidence is recovering. Such changes often accompany market trend reversals and are a key turning point signal for market sentiment.

Indicator trigger critical point:

• Once the average cost of short-term holders exceeds their holding cost, it indicates that this batch of funds is realizing a profit and loss reversal. Their profit-taking sentiment will bring stronger buying momentum, pushing prices continuously above previous trading ranges until the upward momentum is neutralized by selling pressure from long-term investors. Therefore, when the "short-term holding cost line" crosses above the "cost line," it often indicates that the market is warming up, and the signal for trend reversal has appeared on the right side of the chart.

Currently, this has not been triggered, but the yellow line has begun to converge towards the blue line. The curve convergence based on this indicator remains a left-side entry thought.

The extreme deviation pricing range based on the MVRV ratio can also be viewed as different thicknesses of glass. When the overall reaches breakeven, participants are unwilling to exit with further losses, leading to a decrease in downward marble momentum. This indicates that most market participants still have a positive outlook on Bitcoin's long-term prospects and have not been swayed by short-term fluctuations. In a market atmosphere dominated by "bear market expectations," when prices break below key cost lines, it often triggers a series of panic sell-offs, rather than the current rapid stabilization. Combining the current profit and loss patterns of long-term and short-term holders, as well as the weakening downward momentum, one can infer: the market is very close to a local low, and this stage possesses strong left-side entry value.

The second viewpoint is the supply and demand relationship between stablecoins and Bitcoin, namely BTC-SSR.

The market capitalization of BTC divided by the total market capitalization of all stablecoins represents Bitcoin's ability to capture liquidity from the entire stablecoin pool. The stronger this ability, the higher the probability of price increases; conversely, the trend weakens.

From the BTC-SSR trend, it can be seen that since the market started at the end of 2023, whenever Bitcoin and stablecoins diverge, there is a significant possibility that stablecoins will flow into Bitcoin, pulling BTC-SSR back into the range. This pattern has appeared twice, with peaks on March 13, 2024, and November 21, 2025, corresponding to prices of $73k and $98k. Four local lows occurred on August 5, September 6 last year, March 10, and April 8 this year, all at local low prices. Further observing the comparison of stablecoin market capitalization and Bitcoin market capitalization, whenever there is a divergence between stablecoin and Bitcoin market capitalizations, BTC-SSR will quickly begin to decline until it reaches the ratio at the start of the 2023 market, indicating that the momentum of stablecoins flowing into Bitcoin is continuously accumulating. Once it reaches the demand zone, the energy will be released immediately. Currently, the market capitalization of stablecoins is still accelerating upward, and the continuous inflow of stablecoins is likely to lift Bitcoin's market capitalization. The premise remains that the bull market exists, and the trend has not disappeared.

The third viewpoint is that high and low dense chip areas will form a dual-anchor effect.

This viewpoint also comes from Murphy. Previously, we expanded the definition of supply and demand from the narrow order book buy and sell to the supply and demand of long-term and short-term holders, and now we will extend the time dimension further. Observing the historical supply and demand relationship of Bitcoin. One indicator worth observing is the dense chip area.

Indicator principle:

• The dense trading of Bitcoin within a specific price range reflects the recognition and layout of substantial funds. During a downturn, high-position holders unwilling to cut losses create "damping forces," similar to branches on a cliff that can slow down the price's descent; conversely, low-position holders with strong bullish expectations are often willing to hold coins for a rise, like protruding rocks on a cliff that can support prices. The combination of these two forces constructs the key support structure of the market.

Historical data supports this:

• In June 2024, Bitcoin gathered about 8% of chips in the $39,000 to $43,000 range, forming a clear support zone; while 12% of chips accumulated between $60,000 and $68,000, creating strong resistance. During the external shocks in July and August (such as the German government's sale of BTC and yen carry trade replenishment), prices fluctuated between $43,000 and $60,000, demonstrating that these two dense chip areas successfully constructed a buffer zone. Notably, on August 5, 2024, BTC's lowest retracement to $49,000 happened to fall between the two dense areas, confirming the natural anchoring effect of the chip structure on prices.
• In November 2022, the FTX incident triggered a market liquidity crisis, but BTC prices remained stable between $6,000-$10,000 (chip proportion 13%) and $18,000-$22,000 (19%) in these two high-density chip areas. On November 9, the lowest drop to $15,500 also precisely landed in the middle of these two ranges, reflecting that even in extreme panic, the chip structure could still provide stable support.

Failed cases of not forming anchoring effects:

• In March 2022, after BTC fell from its high of $69,000, it hovered around $35,000-$45,000 for nearly two months. At that time, the market was severely divided; some believed it was a bull market adjustment, while others judged it was the beginning of a bear market. However, from the chip distribution perspective, no concentrated holdings formed below the price, with chips evenly distributed between $25,000 and $66,000. The truly supportive chip accumulation was far below at $6,000-$12,000. As a result, under the dominance of panic sentiment, prices quickly broke through the range, ultimately confirming the entry into a bear market.

Current situation:

• Currently, approximately 11% of chips are gathered in the $60,000-$70,000 and $93,000-$100,000 ranges, forming a symmetrical structure. If we refer to past historical performance, this distribution pattern has the ability to limit price fluctuations within the $70,000-$93,000 range. As long as this chip structure is not destroyed, the price's central "consensus hub" is likely to be re-established between these two dense areas. The anchoring theory can also be explained using the marble theory, where the momentum causing price fluctuations is like a stretched rubber band. When the price moves towards the low chip dense area, upward momentum can continue to accumulate, and before touching the low chip area, it will trigger upward, resulting in a rebound. Therefore, $70,000 will become a core support level that is difficult to break in this cycle.

After analyzing the viewpoint that the current rebound may turn into a reversal, we discuss the impact of tariffs in this process. To conclude: The impact momentum of a single event on the market will gradually diminish, provided that the event does not worsen further.

The market adjustment triggered by tariff policy expectations can be divided into three stages: February 25 to 28, March 10 to 13, and April 7 to 10.

Starting from the behavior of investors transferring loss assets to Binance during the downturn, we can objectively quantify the intensity of the market's impact at each stage. Data shows that the realized loss scale in the first stage reached $139 million, far exceeding the subsequent two stages, which were $43.92 million and $58.9 million, respectively. Such behavior shows a clear decreasing trend on-chain, indicating that the initial psychological impact on the market was the greatest, while subsequent stages, although still showing panic reactions, have converged in magnitude.

Severe sell-offs have pushed prices back to the demand zone, and it is highly likely that Trump will not release more negative signals regarding tariffs than before. Tariffs are generally high for most countries and lightly dropped, with limited destructive power. A 10% reciprocal tariff has already achieved its purpose. Trump cannot afford further selling of 10-year U.S. bonds and can only operate within a range that does not trigger panic selling of U.S. bonds, thus controlling the destructive power further. The buff added to the supply side by tariffs will begin to lose effectiveness, and downward momentum will start to diminish. Therefore, market sentiment is gradually easing, short-term holders will gradually profit, and long-term holders' selling pressure is still far from arriving, with a significant possibility of stablecoins flowing into Bitcoin. This supports the current rebound potentially strengthening into a reversal, and the attractiveness of left-side entry is increasing.

Second Viewpoint: The Current Rebound is a Second Distribution After Accumulation

This viewpoint holds that the current stage is a downward continuation leading to a long-term bear market. The macro discussion reasons relate to inflation exacerbated by tariffs, leading to stagflation and accelerating the possibility of recession. However, the core of this viewpoint is that the U.S. stock market has entered a technical bear market, and the continued decline of the U.S. stock market is inevitable. Bitcoin cannot remain independent and will be dragged down by the U.S. stock market. Therefore, here we share how to determine that the U.S. stock market has entered a technical bear market.

The second viewpoint believes that the U.S. stock market's performance over the past few months completely aligns with the Wyckoff distribution phase. The author explains this viewpoint from the price and corresponding trading volume, namely volume-price behavior. The yellow arrows in the chart indicate the need to pay attention to the daily trading volume patterns; the light blue shoulders indicate the need to focus on the trading volume patterns over a period.

On November 6, the price began to rise sharply, and trading volume expanded, with price spreads also increasing, marking that a phase high point was approaching. This is PSY------the initial supply point.

From late November to early December is the BC buying climax: also known as the buying dense area. Both trading volume and price spreads significantly expanded, with selling power reaching its peak. Near the market top, the public's eager buying was met with substantial selling from the main force.

On December 18, after the buying climax, the AR naturally retreated, with buying almost exhausted, but selling continued, leading to a natural decline. The lowest point of the natural decline helps define the market bottom of the distribution trading range.

The volume of buying on December 20 is the first accumulation, namely the ST second test: after the natural decline, the price rises again to the buying climax area to test the supply and demand conditions near the buying climax area. When the price approaches the resistance zone of the buying climax, trading volume should decrease, and price spreads should narrow, indicating that supply will exceed demand, confirming the price top.

From late December to early January, a SOW weak signal appears: weak signals usually occur at the end of distribution, with prices falling to the bottom of the distribution range or slightly breaking through the bottom of the distribution range, often accompanied by increased trading volume and expanded price spreads. Weak signals indicate that supply controls the market.

From January 13 to January 23 is the UT upward breakout and retreat: the purpose of the upward breakout and retreat is to entice the last wave of buyers to continue entering long positions while triggering the stop losses set by early short sellers. The upward breakout and retreat is a price stoppage behavior, but it gives the public the impression that prices are about to break through the resistance zone, as the main force does not want the public to see that prices are about to fall.

On February 19, after the distribution, the UTAD upward breakout and retreat occurred: it is the main force's final test of the new demand generated after breaking above the resistance line of the price range.

From February 19 to early March: demand was falsified, and trading volume accelerated the escape.

On March 25, the LPSY appeared as the last supply point: even with increased buying volume, after the SOW tested the support strength of the ice line, the price rebound was weak, and price spreads narrowed, indicating that price increases were relatively difficult. The difficulty in price increases may be due to exhausted demand or supply controlling the market. The last supply point is the main force's final distribution before the price rapidly declines.

The U.S. stock market's price patterns and corresponding trading volume expansion or contraction fully align with Wyckoff's distribution theory. This proves that the U.S. stock market has completed the final sprint of the bull market, and distribution has been completed. Next, it is necessary to find the LPS, the last support point, to achieve a transition from bear to bull; before that, it is all a bull trap, and one should short at highs.

The differences between the two mainstream market viewpoints can also be seen as expectations for the U.S. stock market and the possibility of Bitcoin decoupling from the U.S. stock market: if the U.S. stock market cannot stop falling, can Bitcoin remain independent? Or can the U.S. stock market build a bottom here while Bitcoin rebounds first?

Market divergence is further intensifying. Which viewpoint do you agree with?