Examining Who Is Liquidating Bitcoin Amidst Record Prices
BTC recently soared past $124,000, however, its momentum seems to have faded, consistent with trends observed since mid-July.
Key Points to Consider:
- Long-term holders are reportedly increasing their selling activity, affecting market momentum.
- Data from blockchain sources indicates a decline of over 300,000 BTC in long-term wallets over the last month, activating previously dormant wallets.
- Institutional activity involving call overwriting appears to be reducing volatility, while strong demand at the $118,000 level supports the market amid various macroeconomic factors.
Since mid-July, the rise of bitcoin (BTC) has been stalling around the $120,000 mark. Prices reached a new peak of $124,157 early Thursday, but quickly retracted to around $123,000, showing a lack of sustained momentum. This situation begs the question: who is cashing out bitcoin and pressuring the market to sell?
According to blockchain data, there has been significant activity from older wallets liquidating their assets. Gabriel Halm, Senior Blockchain Analyst at Sentora noted, “This could be linked to accelerated selling from long-term holders. Historically, phases of selling from these holders are distinctly defined within Bitcoin’s cycles. However, the recent accumulation during the second quarter’s downturn has led to new selling, which might suggest a change in market dynamics.”
The amount of BTC owned by long-term holders, defined as wallets with holdings for 155 days or more, has decreased by more than 300,000 BTC over four weeks, as per Bitcoin Magazine’s data. Multiple previously inactive wallets, dormant for over a decade, have become active and are shifting coins on-chain for the first time in years, likely for profit-taking.
Recent insights from Glassnode indicate that profit-taking activity from long-term holders has continued, albeit at a slower pace compared to July, with profit realizations averaging above $1 billion per day during one of the largest profit-taking stretches on record.
Sam Gaer, Chief Investment Officer at Monarq Asset Management, remarked that the supply from older wallets has capped pricing upside but has been accepted well, similar to patterns noted last year when Germany’s Saxony state liquidated its assets.
He stated, “Price levels in BTC tend to consolidate around key psychological thresholds (like $100,000, $110,000, $120,000) especially near all-time high (ATH) levels. We saw similar trends last month at the $110,000 level, having touched all-time highs around $112,000 before drifting lower on several occasions.”
Institutional selling activity, particularly related to high-strike calls, could have affected the pace of Bitcoin’s rally as these institutions seek additional yield atop their spot market positions. Gaer elaborated that ongoing call overwriting by long-term holders continues unabated and has contributed to a notable volatility contraction, stating, “Implied volatility recently declined—this is a historical marker of a market maturation.”
Outlook
The current trajectory indicates potential upward movement, fueled by signs of substantial demand and favorable macroeconomic trends.
As Halm pointed out, “1.88 million addresses procured 1.3 million BTC at an average price of $118,000, indicating formidable demand that has kept deeper pullbacks at bay.”
Lastly, the market seems increasingly accommodating the notion of sustained inflation, exceeding the Federal Reserve’s 2% target, with expectations of rate cuts in September.
Steve Gregory, Founder of Vtrader, anticipates a renewed influx of funds into Bitcoin from Ether. “We might see a rotation back to Bitcoin and surpassing the $120,000 mark as Bitcoin’s three-month volatility records its lowest since September 2023. Furthermore, 95% of ETH wallets are now profitable, suggesting traders might logically revert to BTC.”
