Market Downturn and On-Chain Indicators
The cryptocurrency market is currently navigating a critical juncture, marked by the third-largest correction of the current cycle. Bitcoin (BTC), the pioneer cryptocurrency, has retreated 25% from its all-time high, falling below the significant psychological level of $94,000.
While momentum indicators suggest a bearish trend on lower timeframes, analysts from Bitfinex propose that the rapid pace of selling and the extent of realized losses are beginning to stabilize. This suggests that, rather than an prolonged period of capitulation, the market may be entering a necessary consolidation phase for Bitcoin.
From both a technical and on-chain perspective, the current moment is delicate yet informative. Bitcoin's price is trading below the Short-Term Holder (STH) cost basis, which is currently at $111,900.
Experts indicate that downside risks will persist as long as this level is not reclaimed. However, evident signs of seller exhaustion are emerging: the STH Profit/Loss Ratio has fallen below 0.20, signifying that over 80% of recently transacted coins have been sold at a loss. Historically, when the supply in profit for this specific group collapses to such low levels (currently at 7.6%), it often coincides with the formation of local market bottoms.
Macroeconomic Influences and Regulatory Developments
For this Bitcoin consolidation phase to establish a durable base, the factor of "time" is anticipated to be more significant than "price," potentially extending into the fourth quarter. This scenario unfolds against a backdrop of a weakened U.S. macroeconomic environment.
The prolonged 43-day government shutdown has inflicted considerable economic damage, with estimated permanent GDP losses ranging between $7 billion and $14 billion. This has also led to a decline in business confidence, as reflected in the October NFIB index. Furthermore, persistent inflation suggests that the Federal Reserve may maintain higher interest rates for an extended period, which typically exerts pressure on risk assets.
Despite this challenging economic landscape, there have been mixed advancements in the regulatory framework. A bipartisan bill introduced in the U.S. Senate proposes shifting the primary oversight of digital assets from the SEC to the CFTC, classifying the majority of tokens as "digital commodities."
Simultaneously, institutional adoption continues to progress. TKO Group, the parent company of UFC, has entered into a partnership with Polymarket. In Europe, the Czech National Bank has initiated a pilot program that includes Bitcoin in its portfolio. These developments indicate that, notwithstanding the current Bitcoin consolidation phase, there remains substantial structural interest in the underlying technology.
Disclaimer
The information presented in this article is for informational purposes only and should not be interpreted as investment advice. The cryptocurrency market is highly volatile and may involve significant risks. We recommend conducting your own analysis.