Market Shakeup: Bitcoin Falls Below $42,000 as Short-Term Holders Rush to Take Profits

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Currently, Bitcoin is witnessing a drop in price, with its value falling below the $42,000 mark. This move follows a significant increase in the circulating supply of profitable Bitcoin, triggering a wave of profit-taking among investors.

ETC Group’s head of research, André Dragosch, highlights this trend and observes an increase in the transfer of Bitcoin to exchanges for possible sale. Dragosch noted, citing data from Glassnode:

   Overall bitcoin exchange balances have clearly increased, implying a net flow of coins to exchanges over the past week. More specifically, around +14,000 BTC flew onto exchanges on a net basis, according to data provided by Glassnode. This is likely to put some downward pressure on prices in the short term.

Short-term Bitcoin holders drive selling pressure

According to ETC Group, the current market scenario presents a scenario where a substantial portion of Bitcoin and Ethereum addresses are profitable. Company data indicates that 88.3% of BTC addresses and 77.6% of ETH addresses are currently profitable, close to the highest figures of the year.

This environment of a high percentage of BTC and ETH addresses in profit status has apparently encouraged a segment of investors, particularly those with short-term investment prospects, to capitalize on their gains, as indicated by ETC Group analysis.

The ETC group further revealed that these short-term investors, defined as those who have held Bitcoin for less than 155 days, have been transferring their profitable assets to exchanges at a rate not seen since July of this year.

This increase in selling pressure is attributed to a key factor restraining Bitcoin’s recovery as the market adjusts to the increased availability of the cryptocurrency.

To further illustrate the market reaction, last week marked the first case of “net outflows” of cryptoasset exchange-traded products (ETPs) since early October.

The total value of these outflows was approximately $18.2 million, with Bitcoin ETPs experiencing the majority of these withdrawals, totaling $13.1 million. By contrast, Ethereum ETPs recorded a “net inflow” of $5.8 million, suggesting divergent investor interest between the two major cryptocurrencies.

Impact on the market and merchant liquidations.

The recent drop in Bitcoin price from its previous high of around $44,000 has impacted investor sentiment and led to significant trade liquidations. According to Coinglass data, in the last 24 hours there were 115,873 merchant liquidations, culminating in around $424.67 million in total liquidations.

Bitcoin led these liquidations, with $105.51 million in long liquidations and $14.95 million in short liquidations. Ethereum is close behind, with $78.53 million in long liquidations and $7.41 million in short liquidations.

Importantly, these sell-offs and fluctuating market dynamics highlight the divisive fate of the trader in the crypto market. While some investors take advantage of the opportunity to make profits, others face the challenges of rapid market changes.

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