The recent drop in the price of Bitcoin (BTC), which reached the level of US$57,000, caught the attention of investors.
The drop is fueled by a sharp reduction in demand, signaling possible changes in market sentiment.
Why is the price of Bitcoin falling?
Bitcoin, which is usually supported by strong demand from long-term investors and large investors, is facing a major change in this trend. A report from CryptoQuant, shared with BeInCrypto, revealed a 50% reduction in monthly growth for long-term holders.
Demand has dropped from over 200,000 BTC at the end of March to 96,000 BTC now. Permanent holders are essential for market stability. They buy Bitcoin to hold for the long term and have no intention of selling.
On the other hand, large investors, known as “whales”, also reduced their demand. These investors own between 1,000 and 10,000 BTC. In March, their demand growth rate was 12%. It has since decreased to 6%.
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Matteo Greco, research analyst at Fineqia International, notes that the increase in sales, especially by long-term holders, indicates an expectation of a slowdown in the market. This movement suggests that investors are preparing for possible price drops.
When there is a significant increase in selling pressure from long-term holders, it typically indicates that the majority of “relevant” market participants anticipate a sell-off,” Greco told BeInCrypto.
Read more: Bitcoin Price Prediction for 2024/2025/2030
Demand for Bitcoin in spot traded funds (ETFs) in the US has dropped significantly. After a peak in March, where daily purchases exceeded $1 billion, the current rate of purchases of these ETFs is almost zero. |
BlackRock’s iShares Bitcoin Trust (IBIT), for example, has had no new inflows in the last five days, reflecting market caution.
Furthermore, the sale of Bitcoin by miners has increased. Last month, daily sales reached the highest levels since the beginning of January. This activity indicates the need for miners to cover operational costs or make profits, which could intensify the decline in Bitcoin prices.
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Can Bitcoin Find Support at $57,000?
From a valuation perspective, the immediate future could see Bitcoin prices reversing from the $55,000 to $57,000 range. This projection is based on the price realized by short-term holders, which falls around $63,000.
“The $55,000 to $57,000 level is 10% below short-term holders’ current realized price, which has been the ultimate support for prices during bull markets. The current price of Bitcoin is already below the price realized by short-term holders,” explained CryptoQuant.
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Historically, Bitcoin price movements have shown resilience, with reversals occurring around key realized price levels. For example, in January 2024, the price of Bitcoin bottomed out after falling to the realized price levels of short-term holders, which was around $38,500.
“During bear markets, the realized price acts as a ceiling, and as a floor in bull markets,” the company noted.
Thus, investors can anticipate price reversals of $55,000 to $57,000. Otherwise, the market could enter a broader downtrend.
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