Since hitting its all-time high (ATH) over a week ago, bitcoin has been consolidating. Analysts at the crypto exchange Bitfinex say the asset’s structural strength remains intact; however, the bull market is entering a more delicate and reactive phase.

According to the weekly Bitfinex Alpha report, the market is seeing a natural rotation between bitcoin holder cohorts. While this capital rotation reflects a maturing cycle, BTC faces the risk of near-term fragility, especially if demand weakens.

Bitcoin Faces Near-term Fragility

For the first time since early 2024, long-term bitcoin holders have begun to distribute their holdings and lock in profits. This cohort of investors has already started to send more BTC to exchanges and newer wallets. As they sell their assets, newer market participants, including exchange-traded funds (ETFs), institutional buyers, and retail investors, are buying and absorbing the supply.

Bitfinex said ETFs and bitcoin treasury companies account for a significant portion of the purchases. This rotation from long-term to short-term holders is a common feature of every bull cycle. However, the strength of spot demand will determine whether BTC will enter a cooling period or experience another rally.

Currently, on-chain data shows that the majority of the BTC supply is now held in profit. Bitcoin’s spot price has climbed above the 95th percentile level, indicating a sharp increase in the number of investors sitting on unrealized profits. Such dynamics often trigger high profit-taking from short-term holders and opportunistic investors.

Subsequently, the market sees a redistribution of supply to new buyers at higher prices. This could drive a short-term bitcoin uptrend, but weaken the market structure and increase the cost basis. Bitfinex insists that sharp price drops could lead to broader declines in such environments. This increases the risk of volatility and corrective phases, especially if buyer momentum fades.

Altcoins Are Surging

With bitcoin cooling off now, altcoins are witnessing what analysts called “an aggressive catch-up rally.” Investors are now reallocating their capital from BTC to large-cap altcoins in pursuit of additional gains.

Many major altcoins are outperforming BTC for the first time since November 2024, with ether (ETH) and Solana (SOL) leading the charge. The Others Index, a metric that tracks the performance of cryptocurrencies, excluding stablecoins and the top 10 assets by market capitalization, has surged by at least 35% in two weeks, adding almost $85 billion.

Additionally, bitcoins dominance has declined by 6.9%, marking seven consecutive daily declines for the first time since December 2023.