Here’s a tighter, more fluid rewrite with a slightly sharper tone:

Bitcoin advanced toward $65,000 after softer-than-expected inflation data, but on-chain signals suggest the rally is being met with selling from two key investor groups.

While macro conditions are providing support, both long-term and short-term holders are reducing exposure, which could slow further gains.

Long-term holders — defined by Glassnode as wallets holding bitcoin for at least five months — appear to be losing conviction. Many who bought near last year’s highs are using the rebound to exit positions at a loss rather than wait for a full recovery.

At the same time, short-term holders are capitalizing on the move higher. Investors who accumulated BTC near recent lows are now locking in profits at a pace exceeding $4 million per day, mirroring the selling wave seen in May when prices briefly pushed toward the 200-day average above $82,000.

With both groups selling simultaneously, the market is facing increased overhead supply just as bitcoin attempts to break higher — a sign that confidence remains fragile, particularly among those still underwater.

Analysts note that as BTC approaches $66,000, realized losses among long-term holders are climbing sharply. Many cycle-top buyers are treating the rally as an exit opportunity, accepting smaller losses than they would have faced below $60,000 — highlighting weakening conviction.

Meanwhile, profit-taking from short-term holders is intensifying, with selling volumes nearing levels last observed during May’s peak, adding further pressure to the rally.

Bitcoin has rebounded from around $61,500 to nearly $65,000 this week, with most of the gains following Tuesday’s inflation report. June’s CPI rose 3.5% year-over-year, below expectations of 3.8%, signaling easing price pressures. Core CPI came in at 2.6% annually and was flat month-over-month.

The producer price index also undershot forecasts, reinforcing expectations that inflation is cooling. This has reduced fears of additional Federal Reserve rate hikes, pushing the dollar index down roughly 0.5% to 100.48, while Treasury yields have also declined.

However, some analysts remain cautious about the durability of the move. They argue that falling oil prices played a major role in June’s softer inflation data — and with oil now rebounding, those figures may already be outdated.

Ryan Lee, chief analyst at Bitget, noted that the CPI slowdown was largely driven by a roughly 10% drop in gasoline prices during June, a move that had already reversed before the data was released. He added that Brent crude has climbed to a one-month high amid escalating tensions around the Strait of Hormuz.

According to Lee, markets may be reacting to backward-looking data, while July’s inflation reading could reflect renewed geopolitical pressures.

Jasper De Maere of Wintermute also urged caution. While acknowledging that the inflation data is supportive, he stressed that broader risks remain.

He pointed to ongoing U.S. strikes on Iran and fragile sentiment, with the Fear & Greed Index only edging up from 22 to 25 — still firmly in extreme fear territory. One soft inflation print, he said, does not mark a lasting shift in market confidence.