Simply put
- The buildup of long-term Bitcoin holders during the recent February downturn was relatively weak when compared to the previous crashes involving FTX and LUNA.
- However, an important metric has shifted for the first time since May 2022, indicating that seasoned holders are feeling the strain and are taking losses.
- According to DeKrypto, factors like the CLARITY Act, potential cuts to Federal Reserve rates, and continued ETF inflows could help initiate a recovery.
Long-term Bitcoin holders are currently facing stress following a significant selloff this month, showing signs of a weaker accumulation that might lead to further declines.
The decline to $62,800 on February 6 created pressures on long-term holders reminiscent of the May 2022 crash related to LUNA. This situation marks a “rare change in conviction,” which often occurs in the later phases of a bear market, as noted by Glassnode in a Telegram update.
In the meantime, the 7-day exponential moving average of the Long Term Holders Expense Return Ratio (SOPR) has dipped below 1. This suggests that experienced investors are locking in losses.
Long-term holders are generally viewed as the most resilient participants in the market and have historically been the last defense during cycles, often marking the lows with wealth transfers triggered by capitulation.
With many in this demographic currently underwater, a pressing question is: where might the next support level be? Glassnode suggests that $54,000 is a crucial threshold to watch.
Recent macroeconomic data has done little to illuminate the path ahead.
The U.S. added 130,000 jobs in January, expectations for rate cuts faded, and riskier assets succumbed to losses. Although inflation eased to 2.4%, it didn’t catalyze a recovery for Bitcoin.
According to CME, there’s still a 90% likelihood that the federal funds rate will remain steady in March.
Not everyone, however, believes that a significant drop is imminent.
Sean McNulty, who heads APAC derivatives trading at FalconX, argues that $60,000 may hold as the cycle’s floor for the near future, pointing to what he describes as a “healthy buying flow.” He mentioned, “This level has been sustained by a powerful group of buyers who have absorbed the recent capitulation of short-term holders.”
McNulty notes that the current market pessimism, stemming from a drop that didn’t originate from a systemic crisis like that of FTX, makes further declines seem less likely.
He characterized the recent downturn as an “orderly deleveraging,” which resulted in excessive speculative capital exiting the crypto space without a fundamental collapse.
