Bitcoin has recently recovered from a low of $72.8K following the passage of a US funding bill that alleviated government shutdown fears. This recovery was not without turbulence, as risk assets, including Bitcoin, US stocks, and gold, experienced simultaneous sell-offs during the uncertainty surrounding the vote. The pressure eased after the bill”s approval, leading to a brief price rebound. However, this drop was complicated by approximately $30 million in DeFi positions getting liquidated during the fall to $72.8K.
As reported by Santiment, the liquidation event contributed to setting a short-term bottom, although the subsequent bounce appears to be driven more by relief than by a genuine shift in demand or trend. On-chain analytics reveal troubling patterns, particularly among large holders. Wallets containing between 10 and 10,000 BTC have offloaded a total of 50,181 BTC over the past two weeks, indicating a significant distribution of assets from these key players.
In contrast, smaller wallets holding less than 0.01 BTC have been buying into the dip, a scenario reminiscent of previous market cycles where supply shifted from stronger hands to weaker ones. This trend raises concerns among analysts, with Santiment labeling the current situation as bearish until the selling from large wallets ceases or reverses.
Furthermore, social sentiment surrounding Bitcoin has shifted dramatically. Discussions have transitioned from inquiries about potential rebounds to speculations on how low the price could go. Mentions of target price levels between $50K and $59K have overtaken those discussing the possibility of reaching $90K to $99K. Historically, such a shift in sentiment correlates with fear in the market, which often precedes counter-trend moves. However, it should be noted that sentiment alone does not establish a price floor.
Additional data from CryptoQuant indicates that the percentage of Bitcoin unspent transaction outputs (UTXOs) held at a loss has crept back into the 27%-30% range, a critical zone that may serve as a stress test for the market. If this loss supply surpasses 30% and remains elevated, it could lead to increased forced selling and further price declines. Conversely, if it stabilizes within this range, selling pressure might diminish, allowing for potential price stabilization.
The market is currently at a crossroads, gauging how much additional fear it can absorb before significant selling occurs. The next moves will hinge on whether holders can withstand further stress without capitulating.
