The line between healthy profit-taking and selling driven by weakening conviction is razor-thin.
Currently, it seems that Bitcoin is caught between the two. Technically, BTC has been consolidating above $80k for over three weeks now, but the price action still lacks the strength needed to confirm a bottom.
This puts the $75k level in focus, as it represents the STH cost basis in the current cycle.
Why does this matter? With Bitcoin trading nearly 10% above this level, short-term holders are still sitting on profits.
However, with a key macroeconomic week ahead, any bearish catalyst could trigger fresh selling pressure and put this support to the test, as Maksym Sakharov told AMBCrypto.
About 86% of Bitcoin deposited into exchanges in early October came from short-term holders in profit. This implies that some recent buyers are ready to take profits. Therefore, Bitcoin’s short-term price movements are mainly dictated by how much supply enters the market.
He added,
If sell-offs outpace demand, healthy profit-taking may turn into a stronger selling pressure.
The result? Bitcoin [BTC] closed the first week of October down more than 3%, with its lower wick constantly probing the $80k zone over the past two weeks.
A breakdown below this level could put $75k in focus next, especially if short-term holders take profits at the first sign of weakness.
Naturally, the focus now shifts to long-term holders. Apart from liquidity, Gorjan Kolev also cites scarcity in tracking BTC’s next move. If LTHs continue to HODL while the STHs sell, the available supply could remain tight.
However, if the selling pressure spreads to LTHs, the market could face a deeper correction.
Bitcoin dormant supply puts market conviction to the test
Bitcoin is vulnerable to further price declines as dormant supply meets selling pressure.
According to Lookonchain data, another OG Bitcoin wallet has been reactivated after years of inactivity and moved 4,582 BTC, or worth about $377.58 million.
This follows last week’s activity from another whale wallet, which moved 4,500 BTC worth $375.72 million from the account after being inactive for over four years.
Why is this important? As the chart below shows, Bitcoin’s LTH SOPR has crossed above its yearly average of 1.10, and now stands at 1.25 on a weekly basis and 1.16 on a monthly basis.
So, LTHs are back to profit territory. With dormant wallets active again, the potential for profit-taking and additional selling pressure is now worth watching.
Against this backdrop, Sakharov noted,
With more investors sitting on profits after September’s recovery, the risk of profit-taking has increased. Meanwhile, trading activity remains weak, with Spot and U.S. Spot Bitcoin ETF volumes averaging around $6.8 billion per day, which speaks of a certain lack of market liquidity.
In short, the current Bitcoin setup indicates potential sell-side pressure and low liquidity, meaning that if STHs continue to lock in gains and inactive wallets return to the market, BTC will fail to hold the $80k support zone.
A breakdown below this level could bring the $75k short-term holder cost basis focus next.
Final Summary
Bitcoin faces more selling pressure as holders take profits and dormant wallets become active.
If BTC breaks below $80k, the next key level to watch is $75k.