- Bitcoin faces a downturn, but signs of market stabilization emerge beneath the surface
- Selling pressure from short-term holders slows, suggesting weaker hands may have already exited
Recently, Bitcoin [BTC] took a hit following the latest inflation report, causing a noticeable dip in its price. However, amidst this downturn, there’s an interesting shift occurring beneath the surface.
Despite the recent price slide, the volume of Bitcoin spent at a loss by short-term holders (STHs) has significantly slowed.
What does this mean for Bitcoin’s market future? Are we seeing signs of stability, or is this just another twist?
Bitcoin: The inflation impact
The February inflation report sent shockwaves through the market, casting doubt on a near-term Federal Reserve rate cut.
Bitcoin, previously consolidating above $97,000, briefly dipped below $95,000 before finding support and rebounding to around $96,000.
This drop coincided with a broader sell-off in risk assets, including Bitcoin-related stocks like MicroStrategy (MSTR).
Source: TradingView
Bitcoin’s sharp downward wick followed by a modest recovery signals initial panic selling before dip buyers stepped in. With the RSI at 44.45, Bitcoin remains in neutral-to-bearish territory, suggesting market hesitation.
Additionally, the OBV indicator shows weak buying pressure, indicating caution in the market.
Easing selling pressure highlights stabilization
Despite Bitcoin’s dip, on-chain data suggests that selling pressure from short-term holders is easing.
The volume of BTC spent at a loss by STHs has declined from its early February peak of 5.5K BTC to 3.8K BTC, closer to the yearly average of 3.5K BTC.
This slowdown in panic selling points to market stabilization, with weaker hands likely having already exited.
Source: Glassnode
Additionally, long-term holders remain largely inactive, indicating a strong conviction. This lack of capitulation among LTHs suggests that the recent dip has not sparked widespread panic.
If this trend continues, Bitcoin may find stronger support near current levels, potentially setting the stage for recovery once sentiment improves.
Potential implications for Bitcoin’s market outlook
The easing of short-term holder selling pressure is a key sign of market stabilization. Historically, sharp sell-offs followed by a slowdown in capitulation have marked local bottoms, as weaker hands exit and stronger holders step in.
With the 7-day SMA of STH losses returning to yearly averages, panic-driven selling appears to be fading. Bitcoin’s ability to hold above $95,000 despite macroeconomic headwinds further reinforces its resilience at current levels.
In past cycles, significant LTH capitulation has often preceded macro bottoms, but such a trend is not visible yet.
If LTHs continue holding firm while STH selling declines, it could bolster confidence in Bitcoin’s long-term value, reducing downside risks and paving the way for a potential recovery.
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