Bitcoin’s most steadfast holders are beginning to participate in a notable sell-off, raising concerns about the future trajectory of the cryptocurrency market. According to a report from Compass Point, long-term holders—those who have retained their assets for at least 155 days—have shifted from a period of inactivity earlier this year to becoming active sellers in recent weeks.
In just a span of two days, these long-term holders reportedly executed sales totaling approximately $2.4 billion in Bitcoin. Ed Engel, a Compass Point analyst, emphasized the significance of this trend, stating that it could have substantial implications for the supply and demand dynamics of Bitcoin. Notably, he pointed out that 26% of Bitcoin sold in the past month came from investors who had initially purchased the cryptocurrency at prices exceeding $90,000. This particular group had maintained their holdings throughout the ongoing bear market, but they are beginning to capitulate as Bitcoin approaches what many see as new cycle lows. Engel noted that capitulation among top buyers often characterizes the later stages of bear markets, suggesting that Bitcoin’s current downturn may be nearing its end.
Despite these developments, Bitcoin has struggled to reclaim its record high of over $126,000 set in October. This has been exacerbated by ongoing geopolitical uncertainties, particularly surrounding the conflict in Iran. As Bitcoin faces downward pressure, it contrasts sharply with the stock market, which has recently hit new highs. As a result, investors are left questioning two predominant narratives surrounding Bitcoin: its potential as “digital gold” that should thrive amid geopolitical instability, and its behavior as a high-beta tech stock.
In addition to the challenges posed by market conditions, Bitcoin exchange-traded funds (ETFs) have also been experiencing significant outflows. Recent data indicates that Bitcoin ETFs have undergone their longest-ever streak of net outflows, lasting 12 consecutive days. The net assets in these Bitcoin ETFs have fallen from $107.8 billion on May 14 to $85 billion, exacerbating concerns about investor sentiment.
The price of Bitcoin is down approximately 10% this week, largely influenced by fear-driven liquidation activity triggered by a relatively minor sale involving 32 coins by Strategy. However, analysts contend that this specific sale is not a major factor influencing Bitcoin’s overall price trajectory.
Citi analyst Alex Saunders highlighted that ETF flows are a primary driver of Bitcoin’s price changes, accounting for around 45% of weekly return fluctuations. He noted that the current negative flow trend diminishes the likelihood of renewed investor interest unless positive news emerges regarding regulatory developments or fiscal concerns.
With the current market conditions leading to subdued sentiment and a notable divergence from equity performance, analysts expect that without significant positive catalysts, the outlook for Bitcoin remains uncertain.
