The market pressure on Bitcoin remains severe. Recent purchasers of the cryptocurrency are increasingly selling their holdings.
Why? Because these newer investors are spooked by a combination of factors: heightened volatility, weak demand, and cash-short cryptocurrency exchanges. Despite attempts at bottom-fishing by some investors, overall sentiment is too cautious to consider the BTC price as likely to mount any significant rally in the near future. Indeed, it seems more likely that the price will work its way back up to—and through—the $30,000 barrier. We may also see further panic-driven selling in the days ahead.
The most recent data indicates worrying developments in Bitcoin’s price behavior, with the Short-Term Holder Spent Output Profit Ratio (STH-SOPR) now well below the key break-even level of 1. This is an unmistakable indicator of fear and loss realization among recent purchasers who are now hurrying to get out of their positions as the price keeps declining. The STH-SOPR metric, which keeps an eye on the profitability of short-term holders, suggests these holders are now in deep trouble with substantial losses—something that is triggering a market-wide panic.
The present Bitcoin sell-off resembles past capitulation events in intensity. A unique metric we created—SOPR-adjusted CDD—that tracks sell-off intensity for Bitcoin, shows that we may be facing a sell-off similar to the capitulation event in August 2024. Back then, Bitcoin’s price fell to right around $49,000, triggering a wave of panic selling and mass liquidation among short-term and long-term holders alike. The current dynamics driving the Bitcoin market suggest that we may hold a mirror up to August 2024 and see the current market as a roughly similar phase where fear among investors is driving the sell pressure.
The panic-selling trend isn’t limited to just short-term holders; it involves a broad spectrum of market participants. Bitcoin’s inability to pierce significant support levels has set off a mini tsunami across the market that’s akin to the toppling of dominoes. More sellers liquidating under the influence of panic means still more price declines that, of course, induce even more panic. The market hasn’t found a new floor yet. And with the prospect of still lower prices, it looks and feels hemmed in by liquidity constraints.
The CDD metric adjusted for SOPR—that tracks the intensity of sell-offs adjusted for the market’s age distribution—has a deeper understanding of market sentiment. And it currently shows that the sell-off intensity is in line with some previous capitulation events. So it would appear that Bitcoin may be on the brink of yet another phase of consolidation or possibly further downside movement. In which case, the market is in a precarious state with the overall future direction of the cryptocurrency’s price hanging in the balance.
Even as demand for Bitcoin falls away, panic selling continues at a high level. The potential buyers who are supposed to step in and pave the way for a recovery simply aren’t showing up yet. With no accumulation phase in sight, and with all this fear apparently keeping any would-be buyers firmly in the sidelines, it is very hard indeed to make a case for recovery.
Right now, the sharp price drops are serving up a contrasting image to the one most people associate with Bitcoin. It kind of feels like Bitcoin is trying to carve out a bottom and failing to do so at this point. In a bad and still somewhat murky economic environment, what we have for now is a Bitcoin that seems to be continuously playing out the basing picture, with no signal really in sight that it is trying to either play out a bullish or bearish scenario for more than a day at a time.
Another factor at play is liquidity constraints. When more sellers leave the market, the amount of Bitcoin on the exchanges rises; but the amount of demand does not rise with it. This supply-and-demand imbalance makes achieving price stability impossible. And so, under the combined weight of the current upward pressure on the price of Bitcoin and the effective downward price resistance caused by demand liquidity constraints, the price of Bitcoin remains under pressure with no clear sign that a sustained recovery is in our future.
The next issue to be settled is whether Bitcoin can reestablish itself or if the market is going to keep falling. If it does keep falling, it may resurrect a 2018-style crypto winter. The 2018-19 period saw Bitcoin fall from around $14,000 in January 2018 to under $4,000 by December 2018. It wasn’t until May 2020 that the price became anything close to what it was in January 2018.
One key thing to keep an eye on is how much demand there is coming from institutional investors. In past market cycles, institutional players have been a really important force driving Bitcoin’s price higher during weak periods. But the current market conditions make it a bit hazy as to whether these players are going to come back in the sufficient numbers needed to push the price up.
Sentiment in the market today is cautious, which means Bitcoin’s potential to move higher is limited at best. That said, the fear and panic selling dominating the narrative right now has investors assessing not just the obvious support levels, but also some not-so-obvious ones, to judge the strength of this alleged Bitcoin bottom.
Bitcoin has an insecure market where recent pressures to sell and a languishing demand have imposed a hefty weight on its current price. The present condition of apparent disarray is not so unique, though, as it mirrors past market episodes when panic-driven and capitulation selling took place. Such moments always seem to happen in a heightened volatility environment. Bitcoin’s recent episode in the market might cause some to question whether it is still here to stay, but that is not the case.
Currently, Bitcoin is grappling with the delicate task of securing steadfast support in an atmosphere that is decidedly liquidity challenged and rife with the prospect of panic selling. For all concerned—mining companies, investors, and individuals with any kind of dog in this fight—there’s a basic, almost primal hope that the market is capable of rebounding and not too far out on the horizon.
Disclosure: This is not trading or investment advice. Always do your research before buying any cryptocurrency or investing in any services.
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