Bitcoin (BTC) experienced a significant rally last week, surpassing $44,000. However, the digital asset encountered strong resistance at nearly $45,000 and subsequently witnessed a price retracement. Analysts at market analytics platform CryptoQuant attribute this pullback to profit-taking activities by a specific group of investors.
Yonsei, an analyst at CryptoQuant, conducted an analysis of on-chain data to understand the factors contributing to BTC’s price retracement. Yonsei discovered that when BTC broke through the $40,000 resistance level, short-term holders and investors who held their coins for 6-18 months began realizing their profits. The analyst identified this profit-taking activity through the Bitcoin Binary Coin Days Destroyed (CDD) metric, which calculates the total value of coins that have not been spent for an extended period. An increase in Binary CDD is indicative of a significant amount of BTC being spent.
During BTC’s rally in early December, Yonsei observed an active Binary CDD, suggesting short-term holders were engaging in profit-taking. This aligns with the fact that a majority of BTC holders were in profit at the time. The Spent Output Profit Ratio, a metric that measures the profitability of BTC holders, remained above one, indicating that roughly 90% of holders were making a profit. Short-term holders took advantage of the high-profit margins and sold their BTC, contributing to the price retracement.
In addition to the profit-taking activities of short-term holders, CryptoQuant’s weekly report revealed that Bitcoin miners and whales exerted selling pressure on the market. High levels of miner outflows were observed when BTC reached $44,000, with miners taking advantage of an average profit margin of 40%. Although the crypto market has left the bear market behind and liquidity conditions are improving, BTC is currently trading around $41,000, representing a 6% decrease from its recent high.
While short-term holders cashed in their profits, long-term holders maintained their positions and anticipate further price appreciation. These investors, who held BTC for six months or longer, did not rush to sell their assets when the price reached $44,000. Their steadfastness suggests a belief in the potential for higher price levels in the future.
At the time of writing, Bitcoin is trading at $41,300, a 1% decrease over the past 24 hours. Despite facing resistance at $45,000 and experiencing a price retracement, Bitcoin’s current price level indicates a possible consolidation before another potential move. As the market liquidity improves and the bear market remains in the past, Bitcoin’s price trajectory will be closely watched by investors and analysts alike.
Bitcoin’s rally to $44,000 encountered resistance at $45,000, prompting profit-taking activities from short-term holders and investors who held their coins for 6-18 months. On-chain data analysis revealed an increase in Binary CDD, indicating significant BTC spending. Additionally, Bitcoin miners and whales exerted selling pressure on the market. However, long-term holders remain optimistic and resistant to selling, anticipating higher price levels. As Bitcoin hovers around $41,000, the market awaits further developments to determine the direction of its next move.
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