Bitcoin’s recent rally above $44,000 was met with resistance at nearly $45,000, leading to a significant price retracement. Market analytics platform CryptoQuant suggests that profit-taking by a specific group of investors might be responsible for this downward trend. By analyzing on-chain data, CryptoQuant’s analyst Yonsei discovered that short-term holders and the investor cohort holding their assets for 6-18 months started realizing profits when BTC broke through the $40,000 resistance level.
Understanding Bitcoin Binary Coin Days Destroyed (CDD)
To assess the scale of profit-taking, Yonsei examined the Bitcoin Binary Coin Days Destroyed (CDD) metric. CDD measures the weight of coins that have not been spent for an extended period by calculating the sum value of the number of days between the creation and spending of those assets. An increase in Binary CDD signifies a significant movement of long-held BTC, indicating profit realization.
During Bitcoin’s rally in early December, the Binary CDD was active, suggesting heightened activity by short-term holders. The majority of Bitcoin holders were in a profitable position, as indicated by the Spent Output Profit Ratio remaining above one for an extended period. This ratio implies that approximately 90% of BTC holders are currently in profit.
While short-term holders sold their BTC at high-profit margins, long-term holders who had held their Bitcoin for at least six months decided to sell just before the cryptocurrency’s price plummeted from $44,000. On the other hand, there was a segment of long-term holders who refused to sell their assets, anticipating further price appreciation. This division between long-term holders further contributed to the overall price volatility.
Selling Pressure from Bitcoin Miners and Whales
CryptoQuant’s recent weekly report revealed that Bitcoin miners and whales exerted selling pressure on the crypto market. During last week’s rally, miners took advantage of the price surge, selling their assets at an average profit margin of 40%. This increased outflow of assets from miners potentially influenced the downward price movement.
Despite the bearish sentiment from profit-taking and selling pressure, the cryptocurrency market’s liquidity conditions have been gradually improving. Bitcoin, however, is currently hovering around $41,000, reflecting a 6% decrease from its recent high of $44,180. In the past 24 hours, the leading digital asset has declined by 1% and was trading at approximately $41,300 at the time of writing.
Profit-taking by both short-term and long-term Bitcoin holders has played a significant role in the recent price volatility. The increase in Binary CDD and the presence of profitable BTC holders suggest that profit realization continues to impact the market. Additionally, selling pressure from miners and whales has further intensified the downward momentum. As the market continues to stabilize and liquidity conditions improve, it remains to be seen whether Bitcoin can sustain its upward trajectory.