Bitcoin Breaks Downtrend: Is a Sustainable Rally Underway?

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Bitcoin has recently made headlines after breaking out of a prolonged downward trend, sparking renewed debate among analysts about the cryptocurrency’s near-term trajectory. On July 1, technical signals pointed to a potential reversal, with Matrixport highlighting that Bitcoin had decisively broken above its declining trendline — a move historically associated with bullish momentum. However, while some see this as the start of a new upward phase, others remain cautious, citing on-chain data that suggests Bitcoin may still be overvalued.

This article explores both the bullish technical breakout and the bearish chain-based warnings, offering a balanced view of where Bitcoin stands in mid-2025.

Matrixport: Bitcoin Breaks Key Downtrend

According to Matrixport, a leading digital asset financial services provider, Bitcoin’s price action on July 1 confirmed a critical technical milestone: the breakout from a descending trend channel that had been in place since early June. This development suggests that short-term bearish pressure may be easing.

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The firm noted that on June 25, its proprietary Fear & Greed Index hit what it described as a “potential bottom,” a level often preceding price recoveries. Just one day later, on June 26, Matrixport flagged Bitcoin as being in oversold territory, reinforcing the idea that selling exhaustion was setting in.

By the end of the weekend, Bitcoin had closed above the upper boundary of its short-term downtrend — a pattern drawn from the June 2 peak — marking what many traders interpret as the first confirmation of a reversal.

While Matrixport acknowledges that structural headwinds remain, including macroeconomic uncertainty and regulatory scrutiny, it argues that from a tactical standpoint, a rebound is now underway. The break of the trendline is not just symbolic; it reflects shifting market dynamics and growing buyer conviction at key support levels.

Crypto Outperforms Traditional Markets in 2025

Despite ongoing volatility and broader market skepticism, digital assets have significantly outperformed traditional financial benchmarks year-to-date in 2025.

Matrixport data shows that:

These figures highlight a growing divergence between crypto and conventional equities, suggesting that investor capital continues to flow into decentralized assets despite macro headwinds like interest rate fluctuations and geopolitical tensions.

The outperformance isn’t limited to large caps — several mid-tier altcoins have also posted triple-digit gains, driven by innovations in layer-2 scaling, restaking protocols, and AI-integrated blockchain applications.

This resilience underscores Bitcoin’s evolving role not just as a speculative asset, but as a potential hedge against monetary devaluation and institutional adoption trends accelerating across Asia and the Middle East.

Bullish Breakout — But Are There Warning Signs?

While technical indicators paint an optimistic picture, on-chain analytics tell a more nuanced story. Not all experts agree that Bitcoin is poised for sustained gains. One prominent voice raising caution is Charles Edwards, founder of Capriole Investments, whose recent analysis highlights several red flags suggesting that Bitcoin’s price may still be inflated relative to underlying network activity.

Dormancy Z-Score Signals Reduced On-Chain Activity

One of the key metrics Edwards points to is the Bitcoin Dormancy Flow Z-Score, which measures the age-weighted volume of coins being moved on the blockchain. A higher score indicates older coins are being spent — often a sign of market tops — while sustained low activity can suggest complacency or overvaluation.

In April 2025, the Z-Score peaked, indicating heightened movement of long-dormant coins. Since then, for three consecutive months, the metric has remained elevated even as price declined — a pattern eerily similar to the lead-up to previous market peaks in 2017 and 2021.

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This divergence — falling price alongside persistently high dormancy flow — suggests that large holders may have already begun distributing their holdings, while retail investors continue to buy the dip. If true, this could limit upside potential in the near term.

Long-Term Holders Begin Unusual Selling

Another concerning signal comes from long-term holder behavior. Edwards observed a sharp spike in selling activity among addresses that had held Bitcoin for 7 to 10 years — a cohort historically known for extreme patience and low turnover.

The volume of BTC sold by these ultra-long-term holders is now ten times higher than previous cycle highs. Such behavior is rare and typically occurs only during periods of extreme market stress or external catalysts.

While this surge in selling could be partially explained by known events — such as Mt. Gox creditor repayments and government-related liquidations — its scale raises questions about whether broader profit-taking is underway.

Historically, when whales who haven’t touched their coins in nearly a decade start moving them, it often precedes extended consolidation phases or bear markets.

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Throughout this analysis, several core keywords naturally emerge, reflecting both search intent and thematic focus:

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Frequently Asked Questions (FAQ)

Q: What does it mean when Bitcoin breaks a downtrend?

A: A downtrend breakout occurs when the price closes above a downward-sloping trendline connecting lower highs. It often signals weakening bearish momentum and can precede a bullish reversal, especially when confirmed by volume and momentum indicators.

Q: Is Bitcoin really outperforming the stock market in 2025?

A: Yes. As of mid-2025, Bitcoin has returned approximately 46%, significantly outpacing the Nasdaq (20%) and S&P 500 (15.1%). This reflects growing institutional interest and macro-driven demand for decentralized assets.

Q: What is the Dormancy Z-Score and why does it matter?

A: The Dormancy Z-Score measures how many older coins are being spent relative to historical norms. Elevated levels after a price peak can indicate profit-taking by long-term holders — often a bearish signal.

Q: Why are 7–10 year holders selling now?

A: Possible reasons include Mt. Gox repayments, government auctions of seized BTC, or strategic exits by early adopters. Regardless of cause, such rare selling behavior tends to coincide with major market turning points.

Q: Does this mean Bitcoin will crash?

A: Not necessarily. While warning signs exist, markets can remain overbought or overvalued longer than expected. The current environment suggests caution rather than panic — monitoring on-chain flows and sentiment will be key.

Q: How reliable are technical breakouts?

A: Breakouts are most reliable when confirmed by volume, momentum (like RSI), and broader market context. False breakouts do occur, so traders should use risk management strategies like stop-loss orders.

Final Outlook: Rebound Confirmed, But Caution Advised

The evidence suggests that Bitcoin has indeed broken its short-term downtrend, validating Matrixport’s bullish technical call. Combined with strong year-to-date performance against traditional markets, the case for continued strength remains plausible.

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However, contrarian signals from on-chain data — particularly rising dormancy flow and unprecedented selling by decade-long holders — serve as important counterpoints. They don’t invalidate the rebound but suggest it may lack deep foundational support.

For investors, the takeaway is clear: a tactical rally is underway, but sustainability depends on whether fresh demand can absorb supply from long-term sellers. Monitoring wallet flows, exchange inflows, and sentiment gauges will be crucial in determining whether this is the start of a new bull leg — or merely a bear market bounce.

As always in crypto, flexibility and data-driven decision-making are essential.