Bitcoin Euphoria Ebbs as Selling Pressure and Distribution Fear Take Hold

Bitcoin has finally broken below the $60,000 support level for the first time in two months. The world's largest digital asset has largely been in a euphoria phase since the beginning of the year, particularly after the launch of Spot Bitcoin ETFs in the US market. However, the current consolidation of the price of Bitcoin indicates the euphoria might be fading.

Bitcoin Euphoria Fades: Selling Pressure and Distribution Fear Emerge

Bitcoin's triumphant reign above the $60,000 support level has come to an end, marking the first time in two months that the digital asset has breached this critical threshold. The former market euphoria that propelled Bitcoin to record highs since the beginning of the year, fueled by the launch of Spot Bitcoin ETFs in the US, has seemingly dissipated. This consolidation in Bitcoin's price action signals a potential waning of the euphoric sentiment that has characterized the market for the past 6.5 months.

A recent report from Glassnode, an on-chain analytics firm, paints a sobering picture of the current market dynamics. According to the report, Bitcoin's euphoria, which has been sustained since March 2022, appears to be waning. Simultaneously, the distribution of BTC has entered the "fear zone," indicating a shift in investor sentiment toward favoring selling.

Surge in Selling Pressure

Bitcoin's price surge to an all-time high of over $73,737 in March 2024 has been followed by an 18% decline as investors seek to lock in profits. This price correction has coincided with a rise in the percentage of addresses holding losses, suggesting an increase in selling pressure. The proportion of addresses making a profit has declined significantly, falling from over 99% to 86% at the time of writing.

On-chain analytics platform Glassnode highlights the consolidation in its latest report. The Net Unrealized Profit & Loss (NUPL) metric reveals that Bitcoin entered a euphoric mode very early in this market cycle compared to previous cycles. Notably, the NUPL crossed over 0.5 approximately 6.5 months before the recent halving, amidst the hype surrounding Spot Bitcoin ETFs.

In comparison, during the 2021 market cycle, the NUPL entered into the profit zone 8.5 months after the Bitcoin halving. The current metric suggests that the market remained in an euphoric phase for the past seven months but has cooled off significantly due to corrections in the past two months.

Net Outflows Signal Bearish Sentiment

The report further highlights a "distinct uptick in net outflows" across all wallet sizes throughout April, signaling a shift in sentiment among traders. This indicates that traders of all sizes are now favoring the selling side. Moreover, a majority of short-term (one week to one month) holders have been posting losses on the 90-day +1sd level since March.

Implications for Bitcoin's Future

While the "fear" rating may raise concerns among investors, it is important to note that a pullback after a substantial price increase is considered a healthy correction by most crypto analysts. Many long-term holders remain optimistic, anticipating the potential positive effects of the upcoming halving event.

At the time of writing, Bitcoin trades at $59,899, down 5.35% in the past 24 hours. Considering the current cost-basis for short-term holders (STH) is at $66,700, and their realized price is at $59,800, a substantial number of holders in this cohort have likely entered into the loss zone.

Crypto analyst Ali Martinez identifies $59,800 as a pivotal price level to monitor. Historically, Bitcoin has tended to rebound above the STH realized price, providing a potential support level.

Conclusion

Bitcoin's recent price consolidation marks a shift in market sentiment. The euphoria that has buoyed the digital asset for the past six months appears to be fading, replaced by selling pressure and distribution fear. While this may cause concern for some investors, it is essential to recognize that such corrections are typical in market cycles and can be opportunities for long-term investors. With the halving event on the horizon, Bitcoin's future remains uncertain, but its underlying fundamentals and long-term growth drivers provide a compelling case for optimism.