Bitcoin’s Recent Decline: Key Factors Behind the Market Shift

The cryptocurrency market encountered a notable downturn today as Bitcoin’s value slipped beneath the $93,000 mark. After achieving a historic peak of $99,588 on Binance just last Friday, Bitcoin, the foremost digital currency, experienced a decline of over 6%, reaching a low of $92,326. In the preceding 24-hour span alone, Bitcoin’s price diminished by 3.6%. Experts attribute this downward trend to three primary factors:

Profit-Taking by Long-Term Bitcoin Investors

As Bitcoin approached the crucial $100,000 resistance level, seasoned holders began securing profits, intensifying the selling activity. James “Checkmate” Check, formerly Glassnode’s chief on-chain analyst, highlighted that long-term investors have offloaded $60 billion in Bitcoin supply over the past month.

Check elaborates, “Bitcoin Long-Term Holders have distributed $60 billion worth of supply in the last 30 days. Notably, 21% of the long-term holder supply movement since the FTX bottom occurred in November. This represents the most significant profit-taking observed in this cycle.”

He further notes that the selling pressure is not originating from long-standing investors, but rather from those who entered the market at the previous peak of $68,000, resulting in the sale of 198,000 BTC in November alone. This trend suggests that investors who weathered previous corrections are now taking advantage of the recent price surge as Bitcoin ventured into unexplored price territories.

Impact of Liquidation Events in the Futures Market

The futures market has witnessed significant liquidations, exacerbating Bitcoin’s price decline. Coinglass data reveals that in the last 24 hours, total liquidations amounted to $577.39 million, with long positions accounting for $468.98 million.

Singapore-based QCP Capital commented on this situation, stating, “Bitcoin has slipped below $93,000 since our last analysis, with over $430 million in long liquidations.” They observed that this decline coincided with spot ETFs ending their five-day streak of net inflows, recording a $438 million outflow on Monday, while MicroStrategy’s stock dropped by another 4.4%.

Additionally, QCP Capital noted, “The pullback follows MicroStrategy’s record $5.4 billion BTC purchase last week.” As US holidays approach and with no immediate catalysts to drive prices higher, they observed that Bitcoin’s journey towards the symbolic $100,000 level has stalled.

The firm also highlighted a shift in market sentiment: “ETH implied volatility has shifted sharply toward puts over calls, reflecting similar sentiment in BTC as the market takes a breather. Growing concerns about downside risks may intensify, particularly with tonight’s FOMC minutes and Wednesday’s PCE data on the horizon.”

Despite the downturn, they offer a balanced perspective: “To put things into perspective, this isn’t an excessive pullback. Bitcoin is merely retracing to levels seen early last week. The market had become extremely overbought since the election with excessive leverage, making a pause inevitable.”

The Vanishing Coinbase Premium

The disappearance of the Coinbase premium, a crucial indicator of US institutional demand, signifies a shift in the market. As Bitcoin climbed towards $100,000, the premium on Coinbase surged, hitting +$224 on November 22. This was driven by robust inflows into US Bitcoin ETFs and substantial purchases by MicroStrategy, which acquired 55,500 BTC for $5.4 billion over the weekend.

However, this scenario changed dramatically yesterday. On-chain analyst Maartunn (@JA_Maartun) notes, “MicroStrategy Single-handedly Held Up the Market. The Coinbase Premium Gap, which was driven by Saylor’s buying spree, vanished, and the market started to tank.”

Charles Edwards, CEO of Capriole Investment, points out the substantial sell wall around the $100,000 level. He remarked that despite MicroStrategy’s massive $5.5 billion purchase, they “only dented the world’s biggest ask wall by ~25%.” This underscores the significant selling interest at the $100,000 level, which has proven to be a formidable barrier.

The diminishing premium on Coinbase also reflects reduced buying pressure from US markets, a factor also evident in the outflows from spot Bitcoin ETFs. Yesterday, spot ETF flows were negative by $435.3 million.

While BlackRock saw inflows of $267.8 million, other major ETFs experienced significant outflows: Bitwise lost $280.7 million, Grayscale BTC Trust (GBTC) saw $158.2 million in outflows, Fidelity faced redemptions of $134.7 million, and ARK Invest shed $110.9 million.

At the time of writing, Bitcoin traded at $92,422.