BitcoinBTCAccording to a report published by Glassnode.
This report drew parallels between current prices and past cycle peaks. It raised concerns over potential downside risks if buying pressure were to wane.
Historical patterns and supply conditions
A key metric in assessing Bitcoin’s vulnerability is the supply held by short-term holders (STH), which mirrors patterns seen in May 2021. Similar accumulation patterns during that cycle increased sensitivity to declines in price, leading to large-scale events.
Bitcoin’s current price hovers between $1,000 and $5,000 above the STH cost basis of $92,500. It has always been considered a crucial pivot level, marking the line between bull and negative trends.
Report warns that, should Bitcoin fall below this threshold level, there could be a series of sell-offs, similar to the previous ones after all-time (ATH) highs, which took place in November and May 2021 and also February and March of last year.
The past corrections followed the same pattern. A rally to price discovery was followed by a phase of consolidation where supply density increased and pressure on sellers increased.
The historical data indicates that, in the event of a bearish market, Bitcoin might retrace to the lower end of the STH model cost-basis, which is currently $71,600.
According to the report, panic buying amongst short-term investors could increase losses if Bitcoin surpasses $92,500. But if the demand for BTC remains high, it could stabilise above its ATH. This would allow BTC to establish a trading range and delay further downside risk.
Derivatives sentiment
Open interest is declining and the funding rate for perpetual futures has also declined.
Although funding rates for Bitcoin and Ethereum remain positive, Solana and memecoins are now negative. These funding rates indicate a move away from a high-risk mindset.
The open interest (OI) contraction further supports this risk-off trend, as memecoins’ OI dipped 52.1%. Comparatively, Bitcoin’s OI declined around 11.1%.
Memecoin’s steep fall in OI indicates that investors are dumping riskier trades as the market becomes more uncertain.
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