Key Points
- The post-halving retracement of Bitcoin’s price has led to a phase of net redistribution, cooling off the “euphoric phase”.
- Increased sell-side activity has been observed, driven by the recent rally to $73,000 and subsequent correction.
Bitcoin’s Price Retracement
The price of Bitcoin (BTC) continues to retrace following its halving, leading to a period of broad net redistribution. This shift has caused the previously “euphoric phase” to stabilize. The current market trends are largely influenced by investors who are driving the sell-side activity.
The flagship cryptocurrency experienced a significant rally to $73,000, which reactivated sell-side pressure. Following this peak in March, BTC has seen a correction, with its price consolidating between $60,000 and $67,500 over the past fortnight.
Market Trends and Influences
Market intelligence firm, Glassnode, utilized an Accumulation Trend Score to observe that BTC’s rise to all-time highs exposed local distribution patterns. These patterns reflect similar structures observed in previous bull markets.
As the market rallied to new highs, sell pressure was reactivated. This pressure was due to investors reintroducing dormant supply back into the market to meet the increasing demand. The Accumulation Trend Score intensified with the escalation of geopolitical tensions in the Middle East, leading to a correction to $60,300.
The launch of spot Bitcoin ETFs in the U.S. on January 11 resulted in a surge in BTC spot trading volume. This development had a positive impact on price momentum. Glassnode used the Net Unrealized Profit and Loss (NUPL) metric to illustrate the ETF’s influence on investor behavior.
The NUPL metric, which measures the magnitude of net paper profits or losses held by the market, has been greater than 0.5 for the past seven months. This indicates that the market is in a “classic euphoria phase of a bull market.”
Short-term Holders and Market Trends
The latest correction was primarily caused by short-term holders. However, the slowing flows into spot Bitcoin ETFs and the high liquidity suggest that the euphoria backing Bitcoin’s yearly highs is starting to dissipate. This cooling off is fueled by recent buyers selling off.
Glassnode anticipates that the cost basis of younger age bands, specifically the 1-month to 3-month and 3-month to 6-month cohorts, will “emerge as valuable tools for distinguishing the bull and bear market structures.”
This means that recent buyers are more sensitive to short-term price movements and are more likely to spend in the short term as the market begins to sell-off. As the market price approaches each sub-cohort’s cost basis, their rate of spending can be expected to slow down, indicating seller exhaustion.
The likelihood of the market experiencing seller exhaustion in the upcoming weeks is high. This is because the cost basis of 1-week to 1-month holders is $66,700, and their realized loss has exceeded the 90-day level multiple times since mid-March.
