Rising Bitcoin [BTC] unrealized profits have raised FUD around a potential capitulation.
From a technical lens, this doesn’t seem too far-fetched. Bitcoin fell over 4% this week, after a three-week rally that sent BTC from $75k to $87k, putting early buyers in profit, as highlighted in a CryptoQuant report.
According to the report, the critical level, in this case, has been identified at $74.6k, which is Bitcoin’s Short-Term Holder Realized Price. Holding above this level would keep the early bull-market structure intact. So, BTC is still in a profit zone, but some holders are starting to take profits with short-term holders sending 45.6k BTC to exchanges in just 24 hours.
However, that’s not the entire story.
Since the 6th of October, U.S. government Bitcoin holdings have reportedly fallen by 17,468 BTC, leaving a balance of 174,481 BTC. Altogether, rising profit-taking and the drop in government BTC holdings have coincided with Bitcoin’s 4% pullback, adding to selling pressure, and fears of further downside.
Usually, profit-taking in a bull market is a positive sign. However, the key detail from CryptoQuant’s data changes the nature of the reading. Of the 45.6k BTC transferred to exchanges by short-term holders, 29.1k BTC are transferred at a loss.
The key takeaway? It is the largest loss-side exchange flow since June’s pre-rally consolidation, suggesting that some investors are realizing losses rather than simply taking profits.
So, with selling pressure picking up, could this be an “early” sign of capitulation?
Bitcoin’s latest correction puts bear trap potential in the spotlight
A report from Santiment directly contradicts CryptoQuant’s take on Bitcoin’s latest pullback.
There is an assertion that Bitcoin holders are capitulating into this drop and selling their shares at a loss. Our realized profit and loss data suggests otherwise.
The report noted that between the 2nd and 8th of October, Bitcoin holders have realized $3.3 billion more in profits than losses. This follows a similar trend in late September, when net profits hit $3.4 billion, and late August at $3 billion.
For comparison, the week of August 14-20 saw around $1 billion in net realized losses, with six of the seven days closing in the red. This time, not a single day ended with a net realized loss.
In essence, Bitcoin’s recent correction appears to be a profit-taking move rather than capitulation; therefore, the bears’ thesis is not convincing.
On the other hand, buyers seem eager to accumulate. Whale orders dominate the market around crucial levels. Not to mention Fidelity’s recent $354 million BTC purchase and the fact that BTC has made higher lows for four straight months, despite the shifting macro environment. Together, these signs suggest that buyers are still holding firm.
So, looking at Bitcoin’s current situation, the 4% correction could very well turn into a bear trap, especially with $3.3 billion in short positions at risk of liquidation if BTC moves toward $85,000.
Final Summary
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Bitcoin’s 4% drop has raised sell-off fears. But Santiment’s data suggests holders are still taking profits rather than panic selling.
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Strong buying pressure and $3.3 billion in potential short liquidations near $85k suggest Bitcoin’s dip could be a bear trap.