Last week, bitcoin (BTC) rallied past $44,000 but hit a significant resistance level at almost $45,000 and came tumbling down.
According to a report by an analyst at market analytics platform CryptoQuant, profit-taking by a certain investor cohort may have caused BTC’s price to retrace.
BTC’s Short-term Retracement
CryptoQuant’s analyst Yonsei discovered through an analysis of on-chain data that when BTC’s price broke through the $40,000 resistance, short-term holders and the 6-18 months investor cohort showed a move to realize profits.
The profit-taking steps were evident in the Bitcoin Binary Coin Days Destroyed (CDD), a metric that measures the weight of coins that have not been spent for a long time by calculating the sum value of the number of days between when the asset was created and spent.
An increase in Binary CDD indicates that a large supply of BTC or those stored for a relatively long time has been spent. Yonsei found that during BTC’s rally in early December, the Binary CDD was also active, signaling recent activity by short-term holders.
The move towards profit-taking is substantiated by a majority of BTC holders being in profit. Bitcoin’s Spent Output Profit Ratio has remained above one for a long time, showing that roughly 90% of holders are in profit.
Profit-Taking by Miners and Whales
While short-term holders sold their BTC at high-profit margins, a cohort of long-term holders with six-month-old bitcoins offloaded theirs just before the cryptocurrency’s price slumped from $44,000. On the other hand, long-term holders have remained adamant in their positions, refusing to sell their assets and anticipating higher price levels.
CryptoQuant revealed in its last weekly report that the crypto market witnessed selling pressure from Bitcoin miners and whales. Last week’s high miner outflow levels showed miners sold more assets when BTC soared to $44,000 at an average profit margin of 40%.
Although the bear market is now in the past and crypto market liquidity conditions are improving, bitcoin is still hovering around $41,000, down about 6% from its recent high of $44,180. Data from CoinMarketCap shows the leading digital asset is down 1% in the past 24 hours and was trading at $41,300 at the time of writing.
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