bitcoin is in the red, fighting off an onslaught of selling pressure. While there was hope on August 23 and the coin started the month on firmer footing, sellers have been adamant.
On the daily chart, not only is the uptrend momentum fading, but the price is also in the lower range of the consolidation. The immediate support zone is between $56,500, which marks the July lows, and around the $58,000 mark, near the August 27 lows.
Fewer btc holders are making money: who is dominant?
As the currency continues to decline, fewer investors are making profits at spot rates. According to one on-chain analyst, there has been a 25% decline. x.com/AxelAdlerJr/status/1831640156085834206″ target=”_blank” rel=”noopener nofollow”>reduction In btc with profits at the time of writing. To put it in numbers, this equates to almost 5 million btc with losses in the hands of different entities spread across the world.
The fact that nearly 5 million btc, or 5 times the amount of coins held by Satoshi Nakamoto, are in the red makes price action more fragile. Although the analyst did not clarify who the majority holders are, if it turns out that the majority are controlled by short-term holders (STH), then there is a higher chance of prices crashing.
STHs are entities that have purchased btc in the past 155 days and may primarily include speculators. These addresses tend to dump btc when prices fall, fueling the sell-off.
On the other hand, if the majority are long-term holders (LTHs), or those who bought more than six months ago, then it will be a relief for the holders. If anything, their holding can anchor the upward leg towards $66,000 or higher. Most of the LTHs are comprised of institutions and HODLers, who are unfazed by short-term price movements.
bitcoin liquidity and the number of active addresses are on the decline
While more btc holders are in the red, it is also emerging that the exchange's liquidity ratio is “very low.” Leading to x, analyst x.com/AxelAdlerJr/status/1831597930333020509″ target=”_blank” rel=”noopener nofollow”>saying that at spot exchange rates, the ratio, which measures the overall level of liquidity in the btc market, is below the 365-day moving average. This means that most traders are apprehensive and staying on the sidelines.
Liquidity, which tends to increase in an uptrend market, will remain low until a rapid trend change occurs. However, if prices fall further, volatility will increase. Still, the short- and medium-term effect will be low liquidity as traders stay on the sidelines and wait for the trend to be defined.
Related Reading: crypto Market Sees $3.65 Billion Liquidity Injection, But Where’s the Buying Pressure?
Falling liquidity is also a worrying trend. An analyst at x x.com/gaah_im/status/1831281597049340325″ target=”_blank” rel=”noopener nofollow”>grades that the number of active addresses on the bitcoin mainnet is at a 2024 low. The drop in address activity indicates an overall decline in investor interest, resulting in low participation.
Featured image from Canva, chart from TradingView