Market Overview and On-Chain Data Analysis
Bitcoin commenced the week with a notable decline, falling below the $86,000 mark. On-chain data reveals a distinct pattern where large wallet holders are decelerating their purchasing activity, while smaller wallets, those holding less than 1 BTC, are actively increasing their acquisitions. Analysts have identified this divergence as a typical indicator of a market entering a phase of "late-cycle vulnerability."
Further analysis of on-chain data indicates a significant slowdown in buying momentum among long-term investors and holders of large Bitcoin wallets in recent weeks. Conversely, wallets with balances under 1 BTC have perceived the recent price decreases as opportune moments to invest. Timothy Misir, Head of BRN Research, characterized this behavior as "classic late-cycle behavior" and issued a caution regarding an increase in short-term market vulnerability.
Impact of Liquidity Shock and Liquidations
The market experienced a significant liquidity shock, which led to Bitcoin's price plummeting to $85,600 during Asian trading hours. This event resulted in a substantial reduction of $144 billion from the total cryptocurrency market capitalization. Data from Coinglass indicates that over $600 million in positions were liquidated within the preceding 24 hours, with $567 million of these liquidations stemming from long positions.
Macroeconomic Factors Influencing Market Sentiment
The recent downturn is largely attributed to macroeconomic pressures originating from Asia. Hawkish remarks made by Bank of Japan Governor Kazuo Ueda contributed to an increase in Japanese bond yields and strengthened expectations for an interest rate hike in December. Furthermore, China's services Purchasing Managers' Index (PMI) falling into contraction territory for the first time in three years also negatively impacted overall risk appetite.
In contrast, the United States is nearing the end of its monetary tightening cycle, with an increasing probability of an interest rate cut anticipated by year-end. Coupled with weekly inflows of $1 billion into crypto investment products, these factors suggest a generally supportive macroeconomic backdrop for the market. Despite these positive indicators, Bitcoin's price has remained largely unresponsive.
Conditions for Bitcoin's Market Recovery
Analysts stress that for Bitcoin to regain market stability and upward momentum, it is imperative for the cryptocurrency to reclaim the low $90,000 range. Additionally, inflows into Bitcoin Exchange-Traded Funds (ETFs) and on-chain inflows need to demonstrate a significant and sustained positive trend.