Bitcoin Market In Distribution: Are We Nearing A Bottom?

Zinger Key Points
  • Patterns of local distribution emerge during consolidation, similar to early stages of previous bull runs.
  • Glassnode's research identifies short-term holders as key influencers in current Bitcoin market dynamics.

Since Bitcoin’s BTC/USD March all-time high of $73,000, the market has transitioned into a phase of widespread net distribution, with investors cashing in on profits.

What Happened: In their latest report, Glassnode analyzes the nuances of investor behavior to identify potential turning points.

Euphoria Phase with a Cool-Off

While the Net Unrealized Profit & Loss (NUPL) metric confirms the ongoing Euphoria phase of the bull market, it has cooled down significantly since the correction began.

This indicates a shift in sentiment compared to the rapid price appreciation seen earlier.

Short-Term Holders Driving the Market

Analyzing the breakdown of sell-side pressure reveals that short-term holders (those who recently acquired Bitcoin) are currently the most active sellers.

Understanding their cost basis and spending patterns can offer insights into potential market bottoms.

Identifying Potential Local Bottoms

Glassnode’s research introduces a framework for identifying potential local bottoms based on the behavior of short-term holders.

Here are the key takeaways:

  • 1w-1m Cost Basis: This metric tracks the average cost of Bitcoin for investors who bought within the last 1-4 weeks. It acts as a sensitive indicator of their selling pressure.
  • MVRV Ratio: This ratio measures the spot price against the 1w-1m cost basis, indicating how much below their average price recent buyers are willing to sell. During corrections, it typically falls within the 0.9-1 range.
  • Realized Loss: This metric measures the total USD value of Bitcoin sold at a loss by the 1w-1m holder cohort. Spikes in realized loss often coincide with market bottoms, as panicked selling intensifies.

Also Read: BlackRock Anticipates Renewed Institutional Interest In Bitcoin Spot ETFs

Current Market Conditions and Potential Bottom Formation

At the time of writing, the 1w-1m cost basis sits at $66.7k, while the MVRV ratio falls within the typical correction range.

Additionally, realized loss for this group has surpassed the 90-day standard deviation threshold, indicating significant selling pressure.

These factors suggest that the market might be hammering out a local bottom formation around the $60k-$66.7k range.

However, a sustained break below the MVRV threshold could trigger further selling and establish a new equilibrium.

This analysis by Glassnode provides valuable insights into the current state of the Bitcoin market.

While distribution is the dominant trend, short-term holder behavior offers clues for identifying potential turning points and navigating market corrections.

Looking Ahead: Benzinga’s Future of Digital Assets Event

Events like Benzinga’s Future of Digital Assets on Nov. 19 provide crucial platforms for industry leaders and analysts to discuss these evolving market dynamics and collaborate on navigating the complexities of the digital asset ecosystem.

Read Next: Jack Dorsey’s Block Under Examination From Authorities Over Alleged Sanctions Violations

This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

Image created using artificial intelligence with Midjourney.

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