Bitcoin [BTC] has slipped below the critical $60,000 mark, triggering renewed debate in the crypto space. After surging over the weekend, BTC quickly retraced back to $58,580 at the time of writing, dampening hopes of a sustained rally. The sudden pullback leaves many wondering if this is a temporary dip or the start of a broader trend.
The recent decline can be attributed to several key factors, most notably the behavior of short-term holders (STHs). After a week of upward momentum and six consecutive green candles, many investors took the opportunity to lock in profits. This is particularly relevant given the bearish pullback at the end of August, which saw BTC fall below $55,000.
Historically, STHs tend to capitalize on price rallies, selling when Bitcoin approaches a market top. According to AMB Crypto’s analysis, as BTC neared $60,500, the STH Spent Output Profit Ratio (SOPR) surged above 1, indicating that a significant number of short-term holders were cashing out their gains.
Compounding the sell-off by STHs, whales—large Bitcoin holders—also scaled back their positions. This further intensified the selling pressure, contributing to Bitcoin’s inability to maintain its momentum above the $60K threshold.
The bearish sentiment generated by this sell-off weakened the short squeeze that initially pushed Bitcoin’s price higher, leaving BTC vulnerable to further declines.
Despite the pullback, there may be a silver lining. While short-term holders are selling, long-term holders (LTHs) are patiently waiting for the next dip to accumulate more BTC. According to Crypto Quant data, LTHs tend to enter the market when Bitcoin’s price declines, using pullbacks as an opportunity to build their positions.
The chart below illustrates how LTHs and STHs behave differently during market cycles. STHs typically sell at market tops, while LTHs accumulate during price drops, driving the next phase of Bitcoin’s growth.
As Bitcoin approaches key support levels, LTHs may step in to counter the pullback, potentially setting the stage for the next rally.
The next critical level to watch is $58,100. If Bitcoin breaks below this support, it could open the door for a further decline towards $55,000. Historically, when Bitcoin’s Market Value to Realized Value (MVRV) Z-score enters the “green box,” it signals a period of accumulation, as seen during previous market cycles.
Despite the current dip, the MVRV Z-score remains on a downward trend since Bitcoin’s price fell below $66,750 in June. If the score continues to decline without a reversal, it may indicate further downside potential for BTC.
While Bitcoin’s price is driven by internal market dynamics, external macroeconomic factors may also play a role in determining the next move. An impending rate cut by the Federal Reserve could inject liquidity into the market, driving renewed bullish momentum.
If these macroeconomic conditions align with a price dip to $55K, it could create an ideal entry point for LTHs to accumulate BTC, sparking a new bull rally. However, without a strong push from bulls or a significant external catalyst, the short-term outlook remains uncertain.
Steven is an explorer by heart – both in the physical and the digital realm. A traveler, Steven continues to visit new places throughout the year in the physical world, while in the digital realm has been instrumental in a number of Kickstarter projects. Technology attracts Steven and through his business acumen has gained financial profits as well as fame in his business niche. Send a tip to: 0x200294f120Cd883DE8f565a5D0C9a1EE4FB1b4E9
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