Bitcoin Pain Isn't Over - But the Next Rally Could Already Be Brewing

Bitcoin’s recent 10% decline from its August 13 all-time high of $124,400 to roughly $111,500 has rattled sentiment.

Despite this, on-chain data suggests that “the foundations for the next bullish phase are clearly taking shape on-chain.”

Maximum Pain or Perfect Entry?

While retail traders remain eager to “buy the dip,” CryptoQuant explained that history shows that durable bottoms form only after optimism fades and capitulation takes hold. The average holder is now at a loss, as evidenced by one important signal, which is the 30-day MVRV ratio that dipped below zero for the first time since September 10.

Negative MVRV levels have consistently indicated undervaluation zones and often precede strong reversals as risk-adjusted entry points improve. At the same time, Bitcoin whale behavior validates this constructive backdrop.

CryptoQuant’s Exchange Inflow Value Bands reveal that wallets holding between 1,000 and 10,000 BTC continue to accumulate, which is in line with Santiment’s data showing over 56,000 BTC added by large holders since late August. Such accumulation during volatility points to confidence and lowers the probability of an extended downturn.

Adding to this bullish trifecta, exchange reserves have fallen by more than 31,000 BTC in the past month, thereby extending a long-term downtrend that limits available supply and eases selling pressure. All these factors create a setup where strategic accumulation, particularly through dollar-cost averaging into key support zones, remains a rational play.

Although another wave of fear-driven selling could still grip the market before a true “maximum pain” bottom forms, these on-chain trends highlight that Bitcoin’s current pullback is less about structural weakness and more about laying the essential foundation for the next major leg higher.

Bitcoin’s Next Catalyst

QCP Capital also said that Bitcoin’s sharp selloff may prove less a bearish warning and more a healthy reset, which is expected to set the stage for a fresh catalyst.

Despite the turmoil, BTC is holding above $112,000-level while equities rally on the Fed’s quarter-point cut and gold prints record highs, amidst broader risk appetite. QCP believes that the washout drained speculative excess from altcoins, knocking the Altcoin Season Index from near 100 to 65 and boosting BTC dominance to 57%.

This rotation back into Bitcoin, coupled with firm institutional support from players like Strategy and Metaplanet and steady spot ETF inflows, confirms the asset’s appeal as the market’s anchor. Historically weak September has still left Bitcoin up 4%, while traders accumulate October 120k-125k calls, as they anticipate the crypto’s strongest seasonal month.

Meanwhile, traders may anticipate additional Fed rate cuts if remarks from Powell on Wednesday and the release of Core PCE data on Friday confirm easing inflation. This could attract an influx of capital.