The recent four-day decline of Bitcoin to $104,000 has led analysts to identify what they refer to as a “defensive rotation” among crypto investors. However, on-chain data indicates that this correction is more of a constructive reset rather than the onset of a wider market downturn.
Last week, Bitcoin (BTC) suffered a four-day fall, plummeting from $115,000 last Tuesday to a four-month low of $104,000 by Friday, which corresponds to a level not seen since June, as per TradingView data.
Despite this significant drop, experts noted that the correction helped eliminate excess leverage, leading investors to shift their focus from seeking profits to safeguarding their capital.
In a report released on Tuesday, blockchain analytics firm Glassnode revealed that the supply of Bitcoin among short-term holders has increased, implying that “speculative capital” is occupying a larger portion of the market.
“On-chain metrics indicate that the share of supply held by short-term holders is climbing, suggesting that speculative capital is asserting itself,” Glassnode elaborated, adding:
“These indicators signify a market transitioning into a protective stance, with traders emphasizing capital preservation over ambitious bets.”
Meanwhile, Bitcoin’s open interest saw a reduction of approximately 30%, indicating that the crypto market is now “far less susceptible to further liquidation cascades,” according to Glassnode in a Tuesday X post.
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Bitcoin’s ascent to $0.2 million signals a “hard time” for “paper hand” investors: Samson Mow
This report from Glassnode emerges amidst a period of rising uncertainty surrounding the future trajectory of the cryptocurrency market cycle.
“The price range of $0.1M to $0.2M poses a challenge for those lacking conviction to HODL Bitcoin,” Jan3 CEO, Samson Mow, mentioned in a Monday X post, adding:
“They’re doubtful because the “cycle” hasn’t unfolded as before, compounded by other assets like gold witnessing a rally.”
Mow forecasted that Bitcoin “will soon add a zero,” but cautioned that “paper hands” investors with shaky conviction should not be rattled by this temporary pullback.
Related: DeFi surges as $11B Bitcoin whale ignites ‘Uptober’ optimism: Finance Redefined
Simultaneously, long-term Bitcoin holders are continuing to sell to institutional investors, according to Glassnode analyst Chris Beamish.
Digital asset treasuries (DATs) and exchange-traded funds (ETFs) have absorbed a “remarkable amount” of the long-term holder supply. However, the upside potential for Bitcoin will remain constrained until this group halts their selling, the analyst remarked in a Monday X post.
Moreover, Bitcoin ETFs have also felt the impact of political instability linked to President Donald Trump’s renewed tariff threats against China.
On Monday, Bitcoin ETFs recorded $40 million in net outflows, marking the fourth consecutive day of selling, as reported by Cointelegraph.
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