Can Bitcoin rally? Analysts point to 3 critical market conditions

• Bitcoin’s BTC small retail holders dominated the market at press time.
• Analysts suggest three conditions for Bitcoin to rally to new highs.

Bitcoin [BTC], the largest cryptocurrency by market capitalization, has been on a downward trajectory over the past month. On its price charts, BTC has declined by 1.01% on daily charts to trade at $56657.

Equally, over the past 30 days, it has dropped by 2.80% suggesting increased volatility.

Since hitting an ATH of $73737 in March 2024, the crypto has struggled to maintain an upward momentum thus even hitting a local low of $49k.

The increased market volatility has spiked questions over the future prospects based on holders’ behaviors. Inasmuch, Santiment’s analysts have suggested three conditions for BTC to hit new highs.

What prevailing market sentiments suggest

According to Santiment, although market sentiment among retail traders has turned positive, it’s not sufficient to boost BTC for a rally.

In the analysis, wallets holding <1 BTC have now increased their holding to the highest levels in seven months. This means that small retail traders are holding the larger share of the BTC supply.

Source: Santiment

However, according to this analogy, increased holding by small traders is not good enough for a rally. Based on this analysis, the first condition for BTC to rally is small holders reducing their holdings.

Ideally, when small holders dominate the market, it indicates increased speculation or a fragile market since small holders are emotional sellers.

Thus, for a sustained rally, fewer small holders are less preferable because they are prone to panic selling.

Secondly, mid-sized investors with 1-100 BTC needs to grow their holdings steadily. A sustained growth by mid-sized investors suggests that more experienced investors and institutions are entering the market.

The entrance of such investors is overall bullish, as it shows confidence in long-term prospects.

The third and final condition for a rally is aggressive accumulation by 100+ holders. Aggressive accumulation by large holders suggests that institutions and whales are bullish on the future prospects.

Therefore, whales accumulating BTC suggesting they are confident in a longer-term price increase through reducing liquidity on exchanges, which usually supports price appreciation.

Bitcoin holder analysis

As noted by Santiment, small retail holders have continued to dominate the market in the recent past.

Source: IntoTheBlock

For starter’s, Bitcoin’s ownership by historical concentration indicated that retail traders holders held 88.24%, which are 17.44 million Bitcoins, while investors hold 10.5% and whales 1.26%.

This shows retailers have a major say in the market, which results in speculative selling, resulting in the recently witnessed volatility and fluctuations.

Source: IntoTheBlock

Additionally, large holders’ inflow has declined from 11.57k to a low of 1.58k over the past seven days.

This suggests reduced demand by whales as they have turned to closing their positions during the market downturn. A reduction in whale holding shows confidence in the future prospects.

Therefore, the increase in small retail traders holding reflects the current market fluctuations.

Read Bitcoin’s [BTC] Price Prediction 2024–2025

During downturns, retail traders tend to close their positions as they are speculative sellers, which further drives prices down.

Thus, an increase in large and mid-sized holders would stabilize the market and push prices up. Thus, if the retail traders continue to dominate the markets, BTC will decline to $54587.