Bitcoin’s recent decline to $104,000 over four days has prompted what analysts describe as a “defensive rotation” among crypto investors. However, onchain data indicates that this correction may actually be a healthy reset rather than an onset of a broader market downturn.
Last week, Bitcoin (BTC) experienced a downturn, dropping from $115,000 on October 14 to a four-month low of $104,000 by Friday—a price not seen since June, as per TradingView data.
Despite this decline, analysts noted that the correction helped eliminate excess leverage, leading investors to switch from chasing profits to focusing on capital preservation.
In a report published Tuesday, blockchain analytics firm Glassnode indicated an increase in short-term Bitcoin holder supply, suggesting that “speculative capital” is gaining a larger footing in the market.
“Onchain, the short-term holder supply share continues to rise, indicating that speculative capital is becoming more prevalent,” Glassnode reported, further stating:
“This combination of signals points to a market moving into protection mode, with traders prioritizing capital preservation over directional bets.”
In parallel, Bitcoin’s open interest dropped by approximately 30%, suggesting that the crypto market is “significantly less exposed to another liquidation cascade,” according to Glassnode in a Tuesday X post.
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Bitcoin’s ascent to $0.2 million signals “tough times” for “paper hand” investors: Samson Mow
Glassnode’s report emerges amidst increasing uncertainty regarding the future of the cryptocurrency market cycle.
“This range of $0.1M to $0.2M poses a challenging scenario for those lacking conviction to HODL Bitcoin,” said Samson Mow, CEO of Jan3, in a Monday X post, adding:
“They’re uncertain because the ‘cycle’ has not followed previous patterns, compounded by a rally in other assets like gold.”
Mow anticipates that Bitcoin will “soon add a zero,” but cautioned that “paper hands” investors with weak conviction should not be disturbed by the temporary downturn.
Related: DeFi surges as $11B Bitcoin whale ignites ‘Uptober’ optimism: Finance Redefined
Concurrently, long-term Bitcoin holders continue to sell to institutional investors, as per Glassnode analyst Chris Beamish.
Digital asset treasuries (DATs) and exchange-traded funds (ETFs) have absorbed an “extraordinary amount” of supply from long-term holders. However, Bitcoin’s upside potential will likely remain constrained until this group ceases selling, the analyst noted in a Monday X post.
Bitcoin ETFs have also faced fallout from political unrest surrounding President Donald Trump’s renewed tariff threats against China.
On Monday, Bitcoin ETFs saw $40 million in net outflows, marking their fourth consecutive day of decline, according to Cointelegraph.
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