On-chain behavior provides a particularly effective perspective for observing market sentiment. From the supply side, when the BTC price rebounds close to the short-term average cost line (STH-RP), realized losses are primarily caused by investors holding for 3-6 months (Figure 1).

Investors holding for 3-6 months are precisely the short-term holders closest to long-term holders. This means that when they are about to break even, their first consideration is to protect their capital rather than continue to take risks, unwilling to shift from STH to LTH.

In terms of realized profits, the profit share of traders selling with profit margins between 0% and 20% has significantly increased (Figure 2). This implies that sellers at breakeven and short-term swing traders choose to close positions with relatively small profits, rather than continue holding and waiting for the trend to continue.

Such behavior exacerbates the selling pressure on BTC near key resistance thresholds, reflecting the fragility of market confidence. If the next rebound to STH-RP still shows such cautious and negative behavior, the confidence of the bulls will suffer repeated blows.

Of course, there is always competition in the market, and the bulls are not so easily subdued. At every critical point of weak balance, the collision of forces from both sides must determine the outcome. If one attempt fails, another will follow, until one side convinces the other, forming the peaks and troughs in this manner.

Behind on-chain behavior is the genuine emotional feedback from all market participants. Clearly, current investors do not possess the confidence and emotional foundation to reverse the trend, which does not change with our personal wishes. However, the stubbornness and layered resistance of the bulls will lead to rebounds after every short-term overshoot.