As the weekend of December 6-7 approaches, Bitcoin's decline continues to impact investors, even as stock markets perform well. The primary driver behind this persistent downturn has been sales from older investors. Concurrently, various negative developments, including FUD surrounding MicroStrategy (MSTR) and discussions about interest rate hikes in Japan, have been observed. The central question remains whether the selling pressure from long-term holders has finally subsided.
Long-term Cryptocurrency Investors' Impact
These long-term investors have played a significant role in Bitcoin's on-chain price fluctuations. Their substantial sales, combined with high leverage, have accelerated the price decline. Amidst generally unenthusiastic investor sentiment fueled by negative news, continuous selling has pushed prices further down. Currently, Bitcoin is struggling to maintain its position above $90,000, having made several attempts to reach the $80,000 level.
The positive news is that while Bitcoin's price is not rising, the selling activity from older investors appears to be nearing exhaustion. As noted by CryptoQuant analyst Darkfost, an on-chain chart tracking investors with holdings older than five years corroborates this observation. The data provides a clear picture of the situation.
The sales activities of old Bitcoin investors (OGs) have significantly decreased in recent weeks. The 90-day daily average was about 2,350 BTC, but the spent UTXOs of these OGs have now returned to a more normal level, averaging around 1,000 BTC.
This chart accounts for only UTXOs older than five years, initially corresponding to BTC purchased around $30,000. Tracking spent UTXOs gives us an idea of the sales pressure from these long-term holders. When such old BTC begins to move, it is usually about to be sold. When we see a UTXO’s BTC move, we call it ‘spent,’ and these are the movements we track here.
Ultimately, the data indicate that the sales pressure from OGs has decreased, providing the market with some breathing room. It is important to note that as the cycle progresses, the sales pressures have lessened, and the STXO peaks of these OGs (90-dma) have been decreasing steadily.
Regardless of fluctuations influenced by news flow, staying informed is crucial in the current market environment. Tools like CryptoAppsy can potentially assist in keeping track of relevant information.
Reasons for Cryptocurrency Stagnation
The $81,000 mark is a critical area for Bitcoin, and this is not by chance. The realized price, which represents the market's average cost basis, is situated precisely at this level. Analyst OnChainMind has developed a new cost metric focusing on the trading market, excluding dormant supply, to identify the true market average. This metric reflects the cost of the active market, suggesting that Bitcoin tends to gravitate towards this equilibrium point. Currently, as the price holds above this level, bulls still maintain an advantage.
Regarding capital inflow, while not as substantial as at the beginning of the year, the flow remains positive. Within the ETF channel, a net inflow of $22 billion is providing a significant balancing influence. Historically, bear markets have seen nearly universal selling, leading to negative capital inflows and widespread disruption. This current situation indicates that past bear market dynamics may be behind us, and adaptation to a new era is necessary.
One of the necessary adjustments for cryptocurrencies has been leverage cleaning. When funding rates become excessively high, significant price fluctuations occur to eliminate those taking on excessive risks. This process is essential for balancing leverage. For weeks, long positions have predominantly experienced this adjustment. Such cleanup is vital for the market to move in a healthier direction.
The most pressing need is to wait for volatility to stabilize. The initial three topics discussed above present positive indicators. Now, the final piece of the market puzzle needs to be resolved. Either after a more significant price drop, Bitcoin will find a period of respite, halting extreme movements, or it will consolidate at current levels. Time will reveal the unfolding scenario.
