Key Points
- Bitcoin [BTC] has dipped below $60K, sparking renewed discussions in the crypto world.
- A reversal could be possible if several key conditions are met.
Bitcoin [BTC] had surged above $60K over the weekend after a two-week consolidation. The momentum, however, was short-lived, as BTC retraced back to $58,580 at press time.
Behind the Decline
The factors behind the decline are being analyzed. Is this just a temporary blip, or is the trend likely to continue? A look at the daily price chart reveals that many investors may have decided to lock in profits after a run of six consecutive green candles. This is particularly relevant following the bearish pullback in late August, which saw BTC drop below $55K.
After a challenging battle, stakeholders squeezed in before the momentum stalled. A glance at the chart clearly showed how STHs and LTHs strategize differently during market cycles. LTHs wait for price drops to accumulate BTC, while STHs typically act as the price nears a market top.
STHs and LTHs
Each time BTC approaches a crucial price zone, the STH supply increases, often followed by a sharp decline. This pattern shows how STHs capitalize on LTH accumulation to drive the price up, then exit once the top is reached.
To confirm whether STHs selling contributed to Bitcoin’s decline, the index was examined. The day after BTC closed near $60,500, the STH-SOPR rose above 1, indicating that more short-term holders were cashing in on their gains.
Whales also scaled back their holdings, intensifying the selling pressure. This bearish trend might have dampened the short-squeeze opportunity that fueled the initial surge. Now, the next dip could be more appealing, allowing LTHs to step in and counter the pullback.
Finding the Next Dip
Bitcoin’s MVRV momentum has been declining since the price fell below $66,750 in June. Despite fluctuations, this downward trend has continued without a reversal. If the bulls don’t push for an immediate rebound, a break below the $58,100 support may lead to a drop towards $55,000.
Historically, when the z-score enters the green box, buying BTC leads to outsized returns, prompting LTHs to accumulate. Other macroeconomic factors might trigger a price correction, causing the z-score to reach the market top before entering the accumulation phase.
In short, a reversal isn’t guaranteed unless certain conditions are met: profit-taking is replaced by a strong bull rally, either due to a dip to $55K or an impending rate cut by the Fed.
