Bitcoin is consolidating after rebounding from below $58,000, but its changing investor mix may make the next selloff more volatile.
The price of Bitcoin is fast approaching the $65,000 level, but there is now a larger portion of price sensitive capital that could cause the market to be prone to volatility in case momentum wanes or there is renewed selling pressure.
Glassnode, a blockchain analytics firm, said in its latest Market Pulse report on Monday that Bitcoin had moved into consolidation after rebounding from below $58,000 and briefly testing $65,000.
Although the rally continues for now, upward momentum has started slowing down, and spot volumes are relatively muted, which indicates that the market still wants a firmer footing.
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Derivatives traders are also no longer as defensively positioned as before. Open interest in futures and options has increased, perps positions have become net long, and there’s lower demand for downside protection, the analysts pointed out.
Still, Glassnode said leverage was being rebuilt relatively cautiously as funding payments from traders betting on further gains remain low, suggesting the market isn’t yet showing the aggressive positioning usually associated with overheated conditions. The analysts wrote:
“Capital flows remain cautious, reflected in the contraction in monthly realised cap, but recovering US spot ETF flows and ETF cohorts moving back toward breakeven suggest institutional selling pressure is fading.”
Consolidation Regime
However, capital entering the market is increasingly “hot,” meaning it is controlled by short-term investors who are more likely to react quickly to price changes.
And that makes the market somewhat less stable beneath the surface. Long-term holders and strong investor profitability continue to provide support, the analysts note, but a larger pool of price sensitive capital can still amplify both rallies and selloffs. They wrote:
“[…] the growing share of short-term, price-sensitive capital raises the likelihood of sharper volatility, leaving the market resilient but increasingly sensitive to shifts in momentum and sell-side pressure.”
Last week, Glassnode said long-term holders had begun selling at a loss less aggressively, though the firm stressed that the market still lacked confirmation that a Bitcoin bottom was in.
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