Since the United States Securities and Exchange Commission (SEC) approved spot Bitcoin exchange-traded funds (ETFs) on January 10, BTC has witnessed intense selling pressure stemming from short-term holders realizing substantial profits.
In the latest edition of the weekly Bitfinex Report, analysts at the crypto exchange warned that BTC is still susceptible to price corrections as short-term holders continue to offload their assets.
Bitcoin surged past $49,000 following the ETF approval news but stumbled by 15% and lost roughly $7,000 within 48 hours. Bitfinex attributed the plunge to heavy spot selling amid increased volatility and liquidity.
Short-term holders scrambled to make profits against their average realized buy-in price of around $38,000. On-chain data showed that $2.2 billion worth of “in the money” BTC was moved to exchanges by this investor cohort as they executed their strategy of buying the news and selling the event.
On the other hand, long-term holders recorded minimal activity during the same period, indicating strong holding sentiment and steadfastness. Around 70% of Bitcoin’s total supply has remained unmoved for more than a year.
Bitfinex believes that while the sell-off may have cooled down a little, the market is still prone to corrections and pull-backs in the meantime, as predicted in the exchange’s 2024 outlook report.
“While short-term speculators may influence the BTC price in the short term, creating volatility and price fluctuations, the medium and long-term outlook for Bitcoin remains positive, despite our belief that there could still be further corrections. Our optimism is largely contingent on the behavior of the LTHs,” Bitfinex said.
Amid the selling pressure from short-term holders, the market has witnessed increasing capital inflows, evident in a rise in dollar-denominated ERC-20 stablecoins on exchanges. Stablecoin balances have spiked to $20 billion from the $18 billion recorded at the beginning of the year.
According to historical data, the growth in stablecoin supply leads to increased buying of crypto assets, a sign of investor confidence. Investors are expected to leverage the augmented liquidity to buy BTC, positively impacting the price of the leading digital asset.
Therefore, a spike in stablecoins being minted or moved to exchanges is considered a bullish sign as major entities prepare to make large purchases.