Bitcoin drops below $57K due to major institutional sell-offs and market pressure.
Short-term holders face unrealized losses, could trigger market volatility if they decide to cut their losses.
$51K is a crucial support level and long-term investors might see this as a buying opportunity.
Bitcoin (BTC) has once again slipped below $57,000 as its turbulent journey continues. At press time, BTC was trading at $56,749.40, down 5.32% in a week.
This latest dip is driven by a confluence of factors, including significant institutional sell-offs, the pressure from short-term holders facing unrealized losses, and ongoing spot market selling.
Institutional sell-offs impact Bitcoin price
A major factor behind Bitcoin’s price decline is the heavy selling activity by institutional investors. Prominent players such as Fidelity, Grayscale, Ark Invest, and Ceffu have significantly contributed to the downward pressure.
Fidelity leads the charge, having sold 16,000 BTC, valued at approximately $915 million. Grayscale follows with the offloading of 15,000 BTC, amounting to roughly $858 million. Ark Invest has divested 7,000 BTC worth about $400.4 million, while Ceffu has sold nearly 3,124 BTC, totalling around $178 million.
Institutions are dumping BTC 🚨 Since August bottom 👇 🔻 Fidelity has sold 16000 BTC worth $915 million.
🔻 ArkInvest has sold 7,000 BTC worth $400.4 million
🔻 Grayscale has sold 15,000 BTC worth $858 million.
🔻 Along with that, Ceffu has sold nearly 3124 BTC worth… pic.twitter.com/4PlbMcGDLH
— Wise Advice (@wiseadvicesumit) September 5, 2024
This institutional sell-off has been a crucial factor in Bitcoin’s drop. The substantial transfers of Bitcoin to exchanges suggest that these major players are either taking profits or rebalancing their portfolios.
Interestingly, while these institutions are actively selling, BlackRock has maintained a neutral stance, avoiding both buying and selling Bitcoin amid the current market fluctuations.
Risk of short-term holders exiting positions en mass
The selling pressure is further exacerbated by the situation of short-term Bitcoin holders, who are currently facing significant unrealized losses.
According to data from Glassnode, short-term holders who acquired Bitcoin in the last six months are experiencing financial stress, with their average cost basis ranging from $59,000 to $65,200, substantially above the current market price.
This cohort’s financial strain is evident in key metrics, and their potential to exit positions en masse poses a considerable risk for increased market volatility.
Despite the average Bitcoin investor remaining profitable, the substantial unrealized losses among short-term holders could potentially trigger broader market weakness if they decide to cut their losses.
The $51,000 price level is highlighted as a critical support that must be maintained to preserve the current market structure.
Potential for market stabilization
As Bitcoin continues to experience strong selling pressure, its market behaviour reflects a complex interplay of institutional actions, short-term holder dynamics, and broader market conditions. While immediate prospects appear uncertain, particularly with the potential for further short-term declines, long-term investors may find value in this period of adjustment.
Analysts have observed some absorption at lower price levels, which might suggest that Bitcoin could be poised for a period of sideways movement before making a decisive move.
Spot still selling off here but at the same time we are seeing some signs of absorption at the lows. Maybe some chop around the lows here for the next few days before we are ready for a real break.
Watching for some ranging PA with potential deviations above/below the BLUE lines… https://t.co/sJpJtIVvLG pic.twitter.com/mGfyiQZLqI
— CrediBULL Crypto (@CredibleCrypto) September 5, 2024
The current dip might present a buying opportunity for long-term investors who can weather short-term volatility.
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