This article is also available in Spanish.
Bitcoin (BTC) witnessed a sharp drop below $90,000 yesterday, raising concerns about its near-term stability. However, the cryptocurrency has since recovered, again trading above $96,000 at the time of writing.
This rapid recovery has caught the attention of market analysts who are examining the underlying trends driving Bitcoin price movements.
Related reading
Is Bitcoin’s rise above $96,000 a quest to stop it?
CryptoQuant contributor Mignolet shared an analysis highlighting the recent price dynamics. According to the analyst, BTC’s recent drop to $89,000 and the current recovery were triggered by the break of a key short-term support level.
Mignolet revealed that this pattern, known as “stop hunting,” occurs when price movements temporarily break support levels before recovering. Despite the recovery, Mignolet emphasizes that a true trend reversal would require greater participation from major market participants.
Mignolet’s analysis points to significant sales activity among whale entities, as seen in Coinbase Premium Gap (CPG) data. Typically, whale buyers step in to absorb those declines, creating notable volatility in the market.
However, this time such activity was absent, raising questions about the sustainability of the ongoing rally. Additionally, Binance Market Buy Index data suggests that large-scale buyers on the exchange have not capitalized on the recent price movement, indicating a cautious sentiment among key players.
Other evidence revealed by Mignolet comes from daily inflows and outflows data for exchange-traded funds (ETFs), which have not yet confirmed any major changes in market dynamics.
While the daily candlestick pattern suggests a significant move, the lack of whale participation could limit Bitcoin’s ability to sustain a long-term reversal. Mignolet also warned that market sentiment could shift too quickly to optimism without clear data to back it up. The analyst noted:
While the candlestick pattern signifies a significant move, the major players are not taking advantage of the opportunity. What worries me most is that many people’s feeling can quickly turn into a sense of relief too soon.
Bitcoin Market Performance
After seeing a notable drop in price yesterday, falling below $90,000 and causing a sell-off of over $300 million in the cryptocurrency market, Bitcoin is finally seeing a notable reversal in its bearish trend.
Notably, over the last day, Bitcoin has increased by 5.6%, making its price trading at $96,351, at the time of writing. However, despite this increase, the asset is still roughly a 10.8% decline away from its peak above $108,000 recorded last month.
While Mignolet’s analysis suggested that Bitcoin’s bearish trend might not be over yet, it is worth noting that the asset’s current rally coincides with less selling activity by long-term holders.
Related reading
In a separate analysis, CryptoQuant contributor Darkfost revealed that the net change in position of long-term holders (LTH) over the last 30 days remains negative but shows signs of improvement. From a low of -827,000 BTC on December 5, the figure has improved to -246,000 BTC.
This reduction in selling pressure suggests that LTHs are less inclined to sell at current price levels as the price of Bitcoin declines. However, Darkfost noted that for the bullish momentum to regain strength, LTHs would need to shift toward accumulation rather than reducing sales.
Featured image created with DALL-E, TradingView chart
