BTC Encounters Resistance and Retracement
Last week, bitcoin (BTC) surged past $44,000 but faced a strong resistance level near $45,000, causing its price to drop.
An analyst at market analytics platform CryptoQuant suggests that profit-taking by a specific group of investors could be responsible for BTC’s retracement.
BTC’s Short-term Holders Take Profits
According to CryptoQuant’s analysis of on-chain data, when BTC broke through the $40,000 resistance level, short-term holders and investors who have held BTC for 6-18 months began cashing out their profits.
This profit-taking activity was observed through the Bitcoin Binary Coin Days Destroyed (CDD) metric, which measures the amount of BTC that has been spent after being held for an extended period of time.
Yonsei, the analyst at CryptoQuant, noted that the Binary CDD increased during BTC’s rally in early December, indicating recent activity by short-term holders.
Majority of BTC Holders in Profit
The trend of profit-taking is supported by the fact that a majority of BTC holders are currently in profit. The Spent Output Profit Ratio has consistently remained above one, indicating that around 90% of holders are making a profit.
Profit-Taking by Miners and Long-term Holders
In addition to short-term holders, long-term holders who had owned bitcoins for six months also sold off their assets just before the price drop from $44,000. However, many long-term holders have maintained their positions and are anticipating further price increases.
CryptoQuant’s recent report revealed that Bitcoin miners and whales were also contributing to selling pressure in the crypto market. During the rally to $44,000, miners sold their assets at an average profit margin of 40%.
BTC’s Current Price and Market Conditions
Although the bear market is now in the past and liquidity conditions in the crypto market are improving, bitcoin is currently trading around $41,000, experiencing a 6% decline from its recent high. At the time of writing, BTC was valued at $41,300.
Hot Take: BTC Faces Resistance and Profit-Taking
The recent retracement in bitcoin’s price can be attributed to profit-taking by both short-term holders and long-term holders. As BTC surpassed the $40,000 resistance level, these investors capitalized on their profits. The majority of BTC holders are currently in profit, indicating a favorable market for sellers. Additionally, Bitcoin miners and whales have contributed to selling pressure in the market. Despite improvements in market liquidity, BTC continues to face resistance and hovers around $41,000. It remains to be seen how these factors will impact the future price movement of bitcoin.
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