Market Pressures on Bitcoin
The current situation in the Bitcoin market indicates a decline in foreign currency deposits, largely due to significant investors and short-term holders realizing losses.
Right now, the Bitcoin market is feeling the heat after a stretch of heavy selling by investors. This selling wave has put downward pressure on prices, which is highlighted by the drop in exchange deposits, even as Bitcoin (BTC) has made a notable recovery over the last three weeks.
According to analysts from CryptoQuant, if the selling pressure remains low, there could be a rebound for Bitcoin. This potential rise might actually gain traction thanks to the recent 25 basis point interest rate cut by the Fed following the latest Federal Open Market Committee (FOMC) meeting.
Sales Pressure Easing
CryptoQuant has noted that Bitcoin’s price has climbed from $80,000 on November 21st to a recent monthly high of $94,000. As of now, it’s trading around $90,000, showing a 1% increase for the week.
Bitcoin transfers to exchanges have seen a significant drop, from 88,000 BTC in mid-November to just 21,000 BTC today. Following its peak at $126,000, deposits started to slide as major companies pulled back from sending coins to trading platforms.
Notably, the share of key players in total deposits has dropped sharply, from a 24-hour average high of 47% in mid-November down to 21%. Additionally, the average deposit amount has decreased by 36%, going from 1.1 BTC to 0.7 BTC during this timeframe.
Is a BTC Rally Ahead?
The drop in foreign currency deposits has stemmed from large investors and short-term holders recognizing losses. About a month ago, both old and new “whales” lost $646 million, which is the largest loss since July, coinciding with Bitcoin’s price falling below $100,000 for the first time. Since that point, these investors have accepted losses of at least $3.2 billion.
Moreover, short-term holders have been offloading their assets at negative returns for the past month, with the lowest loss reaching -7%, while the spent output profit ratio (SOPR) has stayed below 1.
According to CryptoQuant analysts, “Historically, selling pressure subsides when market participants realize they have incurred large losses.”
If the selling pressure continues to decrease, Bitcoin could potentially bounce back to the $99,000 mark. This figure aligns with the lower end of traders’ on-chain realization price range, typically reflecting the annual moving averages and trader on-chain realized prices of $102,000 and $112,000, respectively, which tend to serve as resistance levels during downturns.
