Bitcoin (BTC) is currently experiencing a consolidation phase, leaving investors uncertain about the future and concerned about the potential decline in price. The Bitfinex Alpha report reveals that BTC is hovering around the $37,000 price range, showing signs of diminishing momentum and positive funding rates on futures contracts. This historically indicates market declines, further strengthening the fears surrounding Bitcoin’s performance.
In addition to the decreasing momentum and positive funding rates, BTC also faces the possibility of selling pressure from short-term holders who are eager to realize profits. After four consecutive weeks of positive price movements, Bitcoin recently had its first negative weekly close. The digital asset made an attempt to surge past the $38,000 mark, but this rise was short-lived due to trading activities in the futures and spot markets.
The Cumulative Volume Delta (CVD) metric for the futures market was negative as BTC’s price rose following the surge, indicating heavy profit-taking by market participants. This was confirmed by an 8.7% decrease in open interest, a clear sign that traders were locking in their profits. The spot market also witnessed a significant number of limit sell orders, contributing to the overall selling pressure.
Bitcoin’s fall to $38,000 resulted in the highest hourly trading volume seen since the beginning of the month. This surge in trading volume was reminiscent of Bitcoin’s initial surge to that price mark. However, Bitfinex warns investors to tread cautiously during this phase. While it may appear to be a cooling-off period following Bitcoin’s recent bullish trend, there are still risks and uncertainties that need to be considered.
Interestingly, major altcoins have been outperforming Bitcoin. As the leading digital asset experiences a concentration of supply among various investor cohorts, altcoins are rallying. On-chain analysis reveals a significant tightening in Bitcoin’s supply as the fourth halving event approaches. This event is expected to occur in April 2024. Bitfinex explains that there is currently a higher proportion of long-term holders compared to past cycles, indicating a concentration of supply within this group.
The available supply, which measures the amount of BTC accessible for trading, and supply storage, which represents the amount of BTC held by long-term investors, both show that long-term holders are accumulating Bitcoin at a rate higher than the pace at which new BTC is produced. The supply storage rate exceeds the new BTC issuance by more than 200%, indicating unprecedented levels in history.
Bitcoin’s consolidation phase has sparked uncertainty and fears among investors. The diminishing momentum, positive funding rates, and potential selling pressure from short-term holders contribute to the overall negativity surrounding BTC’s price. Meanwhile, altcoins have been performing well and Bitcoin’s supply is increasingly concentrated among long-term holders. It is crucial for investors to approach this phase with caution and stay informed about the market developments.
