Bitcoin downward price action continues – who is selling?

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As an experienced financial analyst, I have witnessed many market cycles, and Bitcoin’s current price action is a reminder of the volatile nature of this asset class. The selling pressure on Bitcoin continues unabated, with even long-term holders taking profits off the table. This behavior is normal during bull markets, as we saw in 2017 and 2021.

As a researcher studying the cryptocurrency market, I’ve reached the fifteenth week of observing Bitcoin‘s sideways and downward trend. The question on everyone’s mind is how long this bearish phase will persist? Will Bitcoin ultimately reverse course and resume its bull market?

Long term holders take some chips off the table

As a crypto investor, I’ve noticed that the selling pressure on Bitcoin ($BTC) hasn’t shown signs of letting up. Surprisingly, even long-term holders are cashing out their profits. According to analyst Willy Woo’s assessment, this trend is not unusual for bull markets. In fact, it happened during the peak of the last two bull runs in 2017 and 2021. As per Woo’s recent X post:

The OGs. They are selling
They have more BTC than all the ETFs put together… 10x more.
And they sell into every bull market.
This pattern is as old as the genesis block. 

As a researcher studying the cryptocurrency market, I can tell you that Bitcoin has almost reached the peak of its bull run in 2021. Consequently, it’s a prudent decision for some long-term investors to consider selling a portion of their holdings to secure profits and reduce potential risks.

Wall Street machinations

According to Woo’s perspective, there are the intricacies of Wall Street at play. With massive institutional investments pouring into Spot Bitcoin ETFs, Bitcoin owners were elated. This influx significantly boosted Bitcoin’s price, leading us to surpass the $69,000 all-time high in 2021 – a milestone that may have come earlier than anticipated based on past bull markets.

With the arrival of Wall Street, large-scale financial games came into play. Similar to gold and silver markets, substantial investors were able to make heavy paper short bets. An oversized paper short position, significantly leveraged, can halt any market progression. According to Willy Woo’s perspective:

We are now in the modern age of BTC.
Paper BTC has flooded the market since 2017.
Futures markets.
If you want to buy BTC, it used to be you had to buy real BTC.
You can now buy paper BTC. Thus a no-coiner can sell you that paper.
Together you have made a synthetic BTC.

Bitcoin investors might understandably feel uneasy about hedge funds engaging in strategies that involve shorting Bitcoin futures while buying the actual cryptocurrency. However, financial analyst James Lavish points out in his recent Informationist newsletter on Substack that such practices come with risks. If the market shifts direction, these strategies could result in significant losses for the investors.

The price will just rip higher. And higher. And higher.

Until it rips your face clear off.

In other words, hedge funds betting against a price rise must exercise caution. If they’re unable to cover their positions during a short squeeze, the price surge could become more intense.

Miners’ profits fall considerably

As a Bitcoin market analyst, I would note that another significant group of sellers is expected to be the Bitcoin miners. Following the halving event, miner profits have taken a hit. In order to remain competitive and profitable, these miners may sell their existing Bitcoin reserves. The reason being, they will need to invest in new and more advanced mining rigs to continue operations effectively. Failure to do so could result in their inability to sustain profitability, ultimately leading them out of the business.

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2024-06-18 13:09