Bitcoin risk-reward has shifted after recent selloff: on-chain analyst

Bitcoin’s recent price decline has prompted market analysts to assess whether a price floor is forming, with one prominent on-chain researcher stating the risk-reward profile has shifted following the selloff.

James “Checkmate” Check, a former lead researcher at Glassnode and author of Check On Chain, told What Bitcoin Did host Danny Knowles that Bitcoin entered “deep value” territory across multiple mean-reversion frameworks when it dropped into recent price zones, according to statements made on the podcast. Check noted that capitulation-style losses spiked to levels last seen at the 2022 cycle lows.

Check stated that if Bitcoin is not trending toward zero, the statistical setup appears increasingly asymmetric after the selloff. The analyst said the current environment represents a time for market participants to pay attention rather than lose focus.

The researcher said he was focused on market structure rather than identifying a single forced seller behind the price movement.

Check offered a probabilistic assessment, stating that the odds of a bottom forming have increased significantly. He said the probability that the market has already set a meaningful low stands at more than 50%, likely around 60%, according to his analysis. The analyst assigned low odds to Bitcoin reaching a new all-time high within the year without a major macroeconomic shift or significant market event.

Regarding exchange-traded funds, Check cited billions in outflows during the drawdown, but characterized the situation as positioning unwinds rather than structural failure. He noted that at an earlier peak, approximately 62% of cumulative inflows were underwater, while ETF assets under management declined only in the mid-single digits. Check suggested earlier outflows aligned with CME open interest, consistent with basis-trade adjustments.

The analyst criticized reliance on the four-year halving cycle as a timing tool, calling it an “unnecessary bias.” Check said his approach prioritizes observing investor behavior over calendar-based predictions.

Even if the low has been established, Check said he expects the market to revisit it. He argued that bottoms typically form through multiple “capitulation wicks” followed by extended periods of reduced activity, where sustained uncertainty erodes confidence among late-cycle buyers. Check stated that formulating a bear case at current levels would be premature, framing the current zone as late-stage rather than early-stage in the move, while acknowledging prices could decline further.

The analyst described two failed all-time-high attempts in October followed by a sharp decline that likely resulted in significant losses for market participants. He referenced what he termed a “hodler’s wall” of invested wealth positioned above key levels, including a threshold he called the “bull’s last stand.” Check argued that once price broke below those levels, downside probability increased.

A key reference level cited by Check was the True Market Mean, described as a long-term center-of-gravity price that also overlapped with the ETF cost basis. He said that once that level broke, the psychological regime shifted to an acceptance phase where market participants began to believe a bear market had begun.

Check argued the market was subsequently pulled toward a prior high-volume consolidation zone where a significant portion of this cycle’s trading volume had occurred. He said the selloff likely involved leverage liquidations but framed that as secondary to a broader shift in market sentiment, where participants sell rallies during perceived downtrends.

The most significant bottoming signal emphasized by Check was the scale of realized losses during the recent decline. He said capitulation losses occurred at a very large daily rate, comparable to the 2022 bottom, with sellers concentrated among recent buyers from the late cycle and those who purchased during an earlier consolidation period. Check also noted that SOPR (Spent Output Profit Ratio) printed around minus one standard deviation, a reading that has historically appeared in only two contexts: as an early warning signal and near bottoming phases.

Check reiterated that bottoms form through a process involving multiple capitulation events followed by extended periods of reduced speculative interest, rather than a single definitive price point.