Bitcoin has returned to the $66,000 level and is trying to hold above it to continue its recovery. While this has boosted short-term momentum, underlying market signals indicate the upward move lacks strong conviction. Staying above $66,000 is technically important, but the overall supply situation may limit how long further gains can last.
Analyst Axel Adler points out that ongoing net inflows to exchanges remain a major hurdle. As long as more Bitcoin is being moved onto exchanges than off them, the chances for a sustained price increase are limited. Recent data supports this cautious view. Since mid-January, the total Bitcoin held on major exchanges has risen from about 2.723 million to 2.752 million BTC, a net increase of roughly 28,489 BTC. Although the growth hasn’t been steady—reserves peaked in early February before dipping slightly—they have consistently stayed near the higher end of the range. This pattern shows a persistent return of coins to trading platforms, which historically signals growing potential selling pressure. Until exchange reserves fall decisively below January’s baseline, this structural selling pressure remains in place.
The shift in the 30-day average of Bitcoin exchange netflows confirms this trend is more than a temporary blip. Moving from a negative average of -1,187 BTC in mid-January to a positive +628 BTC by late February marks a clear structural change from accumulation to distribution. When this average is negative, it typically means investors are pulling Bitcoin off exchanges to hold, which is seen as accumulation. The steady climb into positive territory in early February, where it has remained for nearly a month, signals a behavioral pivot toward selling. The fact that the metric stayed positive even after a mid-February spike shows coins continue to flow onto exchanges at a steady pace. With an average daily inflow of around 628 BTC, the available supply for potential sales is growing. Until this 30-day average turns negative again, pressure from the exchange side will likely dominate, making a lasting bullish phase less probable.
Looking at the weekly chart, Bitcoin’s structure shows a clear shift from expansion to correction after being rejected near the $120,000–$130,000 zone. The price has broken down below the $90,000–$95,000 area, which was once support and is now resistance, confirming a change in market control. The price is currently consolidating around $66,000 after a sharp drop, hovering just above the 200-week moving average—a key long-term support level during deeper corrections. Holding above it is technically significant; a sustained break below could signal a longer bearish phase. Meanwhile, the 50-week moving average is declining, and the 100-week average is flattening, indicating weakening intermediate momentum and suggesting any rallies may face resistance unless key trend levels are reclaimed.Bitcoin’s link to the Nasdaq during the 2026 downturn saw trading volume surge sharply as prices fell, signaling forced selling and distribution rather than a controlled pullback. Since that spike, volume has declined, suggesting the initial panic has subsided but that strong buying interest has yet to return.
From a structural perspective, Bitcoin is at a critical juncture. To reestablish a bullish trend, it would need to recover and hold above the mid-$80,000 level. On the other hand, if it fails to hold current support, it could fall further to test lower liquidity zones.
Featured image from ChatGPT, chart from TradingView.com
Frequently Asked Questions
Of course Here is a list of FAQs about The Distribution Trap in Bitcoin framed in a natural tone with clear direct answers
Beginner Core Concept Questions
1 What is The Distribution Trap in simple terms
Its a market situation where despite a rising Bitcoin price large holders are consistently selling their coins to smaller buyers This shows that powerful sellers are still in control and may be setting up the market for a potential downturn
2 What are rising reserves and why do they matter
Rising reserves typically refers to an increase in the amount of Bitcoin held on cryptocurrency exchanges This is often seen as a bearish signal because it means more people are depositing their coins likely preparing to sell It increases the available supply for sale on the market
3 So if the price is going up isnt that a good thing Why worry
Yes a rising price is generally positive However the Distribution Trap warns that the quality of the rally matters If the price is rising solely because of hype and retail buying while smart money is quietly exiting the rally may be fragile and not built on strong longterm demand
4 Who are the sellers in control mentioned in the title
This usually refers to largescale entities early investors mining companies selling their mined coins or institutional funds taking profits Their actions have a much bigger impact on the market than individual retail traders
Intermediate Market Dynamics Questions
5 How can you tell if distribution is happening
Analysts look for clues like a steady increase in exchange balances large sell orders on order books price struggling to break through key resistance levels despite good news and onchain data showing coins moving from longterm holder wallets to exchanges
6 Whats the opposite of a Distribution Trap
The opposite is accumulation This is when large holders are buying coins during periods of fear low prices or sideways movement often withdrawing them to private custody This signals strong hands are building positions for the next bull run
7 Does this mean I should sell my Bitcoin if I hear about this
Not necessarily The concept is a warning sign and a risk management tool not a crystal ball It suggests being cautious about