The recent four-day drop of Bitcoin to $104,000 prompted analysts to identify what they refer to as a “defensive rotation” among crypto investors. However, onchain data indicates that this correction was a necessary adjustment rather than the onset of a more extensive market downfall.
Bitcoin (BTC) experienced a four-day decline last week, plummeting from $115,000 on October 14 to a four-month low of $104,000 by Friday, a level not observed since June, TradingView data reveals.
Despite the drop, analysts noted that the correction eliminated excess leverage and encouraged investors to shift focus from chasing profits to safeguarding their capital.
In a report released on Tuesday, the blockchain analytics firm Glassnode reported a rise in the supply held by short-term Bitcoin holders, indicating that “speculative capital” is increasingly dominating the market.
“Onchain, the share of short-term holder supply is on the rise, suggesting that speculative capital is becoming more prevalent,” stated Glassnode, adding:
“This combination of signals indicates a market moving into protection mode, with traders prioritizing capital preservation over directional bets.”
Simultaneously, Bitcoin’s open interest saw a reduction of about 30%, indicating that the crypto market is “significantly less exposed to another liquidation crisis,” according to Glassnode in a Tuesday X post.
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Bitcoin’s rise to $0.2 million indicates “hard times” for “paper hands” investors: Samson Mow
Glassnode’s report arrives amidst increasing uncertainty concerning the continuation of the cryptocurrency market cycle.
“Navigating through the $0.1M to $0.2M range proves challenging for those lacking strong conviction to HODL Bitcoin,” the Jan3 CEO, Samson Mow, stated in a Monday X post, adding:
“They feel uncertain because the “cycle” has not unfolded as previously, and because other assets like gold are gaining traction.”
Mow forecasted that Bitcoin “will soon add a zero,” but cautioned that investors with “paper hands” and weak conviction should not be deterred by this temporary dip.
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In the meantime, long-term Bitcoin holders are continuing to sell to institutional investors, as noted by Glassnode analyst Chris Beamish.
Digital asset treasuries (DATs) and exchange-traded funds (ETFs) have absorbed an “incredible amount” of long-term holder supply; however, according to the analyst, Bitcoin’s potential for growth will remain constrained until this group ceases selling, as shared in a Monday X post.
The political turmoil surrounding President Donald Trump’s renewed tariff threats against China has also impacted Bitcoin ETFs.
On Monday, Bitcoin ETFs recorded net outflows totaling $40 million, marking their fourth consecutive day of selling, reported Cointelegraph.
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