Research from Compass Point indicates that Bitcoin's most steadfast long-term holders have started participating in the recent wave of cryptocurrency selling, which may signal an impending shift in the current bearish market trend.
Compass Point analyst Ed Engel noted in a Tuesday report that long-term holders, defined as addresses holding Bitcoin for at least 155 days, largely refrained from selling between February and April of this year but have shifted to a net selling position in recent weeks.
Engel highlighted that over the past two days, these long-term holders have sold approximately $2.4 billion worth of Bitcoin, stating this "has a significant impact on Bitcoin's supply-demand balance."
He specifically pointed out that 26% of the Bitcoin sold over the last 30 days came from investors whose cost basis was above $90,000.
Engel added, "These high-cost buyers have shown resilience throughout the bear market, but as Bitcoin approaches new cycle lows, they have finally begun to capitulate. Capitulation by high-cost buyers is a common feature of the late stages of a bear market, which reinforces our conviction that Bitcoin's bear market is entering its final phase."
Persistent uncertainty stemming from the situation in Iran continues to weigh on Bitcoin's price, preventing a recovery to the all-time highs above $126,000 set last October.
Meanwhile, U.S. stock markets have repeatedly reached new record highs.
This divergence in performance is causing investors to question Bitcoin's two core narratives simultaneously: its role as 'digital gold' that should benefit from geopolitical uncertainty, and its performance being akin to high-beta technology stocks.
According to data from SoSoValue, Bitcoin ETFs recorded net outflows for the 12th consecutive trading day on Tuesday, setting a new record for the longest streak of outflows.
The net assets of Bitcoin ETFs have declined from $107.8 billion on May 14th to $85 billion.
On Monday, a slight sell-off of 32 Bitcoins by MicroStrategy triggered some panic selling, which in turn set off a cascade of long position liquidations, accelerating the downward pressure.
Bitcoin has fallen a cumulative 10% this week.
However, analysts widely agree that MicroStrategy's selling is not the primary driver of the current Bitcoin price decline.
Citigroup analyst Alex Saunders stated in a report, "ETF fund flows are the main driver of Bitcoin price appreciation, explaining about 45% of the weekly return variation, and are also the best tool for tracking investor adoption and risk appetite. Recent fund flows have remained persistently negative, while the likelihood of the U.S. market structure bill passing is diminishing. In our view, that bill was a potential catalyst to reignite investor interest."
He added, "Unless there is positive regulatory news or market concerns about a 'de-dollarization trade' regarding fiscal conditions, we expect market sentiment to remain subdued, especially given the stark performance divergence between cryptocurrencies and the stock market."
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