Bitcoins
At the beginning of the week, Bitcoin took a nosedive, momentarily crashing to $91.2K before staging a partial comeback to above $96K.
This steep drop occurred alongside a significant global financial market meltdown—many media commentators seeing the rapid deterioration of multiple megacorporations as a good bet for pushing the economy into recession.
Yet the formerly buoyant cryptocurrency market was also seeing the bearish vibes result in actual downtrending price action—and with this Bitcoin inescapably involved as a major crypto market player, talk of its ongoing and future “decentralization” was presaged by ominous Bitcoin Death Star accusations.
???? Bitcoin plummeted to as low as $91.2K as all of crypto has dipped with world stock markets starting the week with heavy bleeding. Media outlets seem to be attributing plummeting sectors to ‘Trump’s trade war’.
Whether this is the primary reason or if there are other… pic.twitter.com/ij1bQ6xfUu
— Santiment (@santimentfeed) February 3, 2025
Even with all the doom and gloom, historical trends indicate that such intense market fear usually precedes a solid buying opportunity. The dip hurt a lot of people, but it mostly hurt short-term holders. Long-term Bitcoin holders remained relatively unscathed and have reemerged as a potentially stabilizing force in the market. Meanwhile, the ETF train just keeps on rolling. On October 2, 2023, the ProShares Bitcoin ETF saw inflows of over $50 million, while overall Bitcoin ETF inflows this year have now crested over $7 billion.
Bitcoins Short-Term Holders Absorb Losses While Long-Term Holders Remain Unfazed
The recent drop under $100K has put a considerable portion of Bitcoin’s supply held by short-term holders (STH) into the red. At $97K, it appears that STHs saw their holdings divided between profit and loss, with approximately 11% of each—our most recent loss exposure since early January. This metric underlines the precarious position of short-term traders who bought into the market at elevated prices, only to be surprised by a swift and sharp downturn.
#Bitcoin dipped below $100K over the weekend, pushing a notable amount of short-term holder (STH) supply into loss. At $97K, the supply in loss & profit held by STHs was evenly split at ~11% – the largest loss exposure for STHs since early January: https://t.co/Drjy6ahQMm pic.twitter.com/gypNiJ0BqX
— glassnode (@glassnode) February 3, 2025
Long-term holders (LTHs), on the other hand, have shown resilience. Less than 0.01% of their supply is in loss. However, the share of unrealized profit that they hold has been on a steady decline since November and now sits at its lowest point since September. This trend suggests that while LTHs are not selling in a panic, they are also not engaging in what one might call aggressive accumulation at these price levels. If Bitcoin continues to slide, LTHs reinvesting might mark renewed confidence in the asset’s long-term value and provide some stability.
Bitcoins Market Sentiment Hits Extreme Bearish Levels—A Contrarian Buy Signal?
When Bitcoin fell under the $100K threshold, a wave of bearish discourse crashed across the crypto’s social media channels. With every passing day, the amount of criticism being leveled at the digital currency was on the rise. Yet what is often lost amid all this impassioned naysaying is just how frequently it can act as a contrarian indicator—an extreme position taken by a group of people that has a good chance of being wrong.
Numerous analysts believe that the steep sell-off was a coordinated effort to force retail traders to liquidate their positions. These traders, who likely purchased near the recent local highs, were then driven below the local lows to sell in significant enough volumes to move the markets. The “strong hand” traders, who are unlikely to be moved by market conditions, then bought up the Bitcoin (BTC) and Ethereum (ETH) that these retail traders sold at bottom prices.
Bitcoins Institutional Demand Holds Strong: Bitcoin ETFs See $560M in Inflows
Although the market downturn has unsettled short-term traders, institutional investors seem to be capitalizing on the lower prices. Between January 27 and January 31, 2023, Bitcoin spot exchange-traded funds (ETFs) saw a net inflow of $560 million. BlackRock’s Bitcoin ETF (IBIT), alone, pulled in $751 million during that time. Both of these strong trends suggest that large institutional players are well-positioned in and bullish on Bitcoin despite its volatility.
Bitcoin ETF’s unfulfilled dream may not even momentarily dampen the idea that long-term institutional confidence in the cryptocurrency is anything but rock solid. If anything, the asset’s continued demand might reinforce that idea.
Last week (January 27 to January 31, EST), Bitcoin spot ETF had a net inflow of $560 million, Blackrock Bitcoin ETF IBIT sees weekly net inflows of $751 million and Ethereum spot ETF had a net outflow of $45.51 million. https://t.co/Tvs2oCSxTg
— Wu Blockchain (@WuBlockchain) February 3, 2025
And if any “demand satisfaction” side of the ETF story were to translate into anything close to actual Bitcoin ETF kind of product, inflows might well indicate Bitcoin ETF base coming to terms with the idea that the application process is likely more of a marathon than a sprint, and that the prospects for actual demand satisfaction remain bright.
Bitcoins What’s Next for Bitcoin?
The immediate future of Bitcoin is unclear, with its price movement determined mainly by how short-term holders behave. If BTC goes down more, long-term holders might step in to stabilize the market. But unless these investors start accumulating again, the asset may be exposed to more short-term downside vulnerability.
Concurrently, the continuous interest from institutional investors through ETFs provides a counterforce that is bullish relative to the bearish sentiment coming from retail traders. If history serves as a guide, this current wave of negativity should set the stage for a very nice recovery, led by those whose purchases are panic-driven and who appear likely to push Bitcoin’s price back up.
At present, Bitcoin’s upcoming actions will rely on its ability to maintain crucial support levels and the perception of this current dip by long-term investors as an enticing entry point. As we await the return of confident market participants, next-day swings in Bitcoin’s short-term price are likely to be the closest thing to predictability that the market will offer. And with price swings sure to happen, volatility will be our constant companion.
Disclosure: This is not trading or investment advice. Always do your research before buying any cryptocurrency or investing in any services.
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