Bitcoin’s most committed holders have begun to participate in the cryptocurrency’s sell-off, a development that could signal the waning phase of the current crypto downturn, according to analysis from Compass Point. This shift in behavior among long-term investors, who have historically demonstrated resilience, could mark a critical inflection point for the digital asset.
Long-term holders, defined by analysts as those who have retained their bitcoin for at least 155 days (approximately five months), had maintained a largely passive stance from February through April. However, recent weeks have seen a notable pivot towards selling. Compass Point analyst Ed Engel highlighted in a recent note that these holders have divested approximately $2.4 billion in bitcoin over the past two days, a substantial sum with significant implications for bitcoin’s supply and demand dynamics.
Further underscoring the extent of the capitulation, Engel pointed out that 26% of the bitcoin sold in the last 30 days originated from investors who acquired their holdings at prices exceeding $90,000. This cohort, often referred to as “top buyers,” had remained steadfast through previous market downturns. Their recent decision to sell suggests a breaking point, as bitcoin approaches what could be new cycle lows. The capitulation of these high-conviction investors is a recurring pattern observed in the latter stages of bear markets, bolstering the argument that bitcoin’s current bear cycle may be nearing its conclusion.
Bitcoin has faced considerable headwinds in its efforts to recapture the all-time high of over $126,000 reached in October. Geopolitical tensions, particularly those surrounding the situation in Iran, have cast a shadow over the cryptocurrency, exerting downward pressure on its price. This contrasts sharply with the performance of traditional equity markets, which have recently scaled new heights, leading to a growing divergence that challenges two core narratives surrounding bitcoin: its role as “digital gold” offering a hedge against geopolitical uncertainty, and its correlation with high-beta technology stocks.
Adding to the bearish sentiment, bitcoin exchange-traded funds (ETFs) experienced their twelfth consecutive day of net outflows on Tuesday, according to data from SoSoValue. This marks the longest streak of outflows on record for these instruments. Consequently, the net assets managed by bitcoin ETFs have contracted significantly, falling to $85 billion from $107.8 billion as of May 14th, reflecting a substantial reduction in institutional and retail investor appetite channeled through these vehicles.
The cryptocurrency has seen a roughly 12% decline week-to-date, exacerbated by fear-driven selling activity earlier in the week. This wave of selling was partly triggered by a relatively small sale of 32 bitcoin by Strategy, a company that had not previously sold any bitcoin since 2022. While this sale itself might not be a primary driver of the market’s broader downturn, it contributed to a cascade of long liquidations, accelerating the downward price momentum.
However, analysts suggest that Strategy’s sale is not the principal factor influencing bitcoin’s current price trajectory. Citi analyst Alex Saunders, in a recent note, emphasized that ETF flows are the paramount driver of bitcoin price appreciation, accounting for approximately 45% of weekly return variation and serving as the most reliable barometer of investor adoption and appetite. The recent negative ETF flows, coupled with diminishing prospects for the passage of a U.S. market structure bill—which could have acted as a catalyst for renewed investor interest—suggest that sentiment is likely to remain subdued.
“We expect sentiment to remain lackluster, especially as the divergence with equity performance remains stark, absent positive news on the regulatory front or ‘de-basement trade’ fears around fiscal position,” Saunders concluded. The path forward for bitcoin may hinge on a significant shift in regulatory clarity, a rekindling of inflation hedge narratives, or a broader market sentiment swing that prioritizes digital assets over traditional equities.
Original article, Author: Tobias. If you wish to reprint this article, please indicate the source:https://aicnbc.com/22460.html
