The cryptocurrency market is still at a very high risk level, CryptoQuant analysts warned, even after a recent drop in Bitcoin prices. According to analysts, the market still hasn’t moved into a high-conviction re-accumulation phase.
Underlying this risk are a number of powerful forces. Two important factors to consider are short-term holder (STH) appetite and the overall level of unrealized losses in the market. Even with the backdrop of renewed risks, one fundamental support zone for Bitcoin remains intact. This kind of resilience wouldn’t happen unless a clear bottom was forming.
As per BTCEarth, this support zone is the most significant and widely recognized level that has been validated time and again. The consistent validation of this support indicates that the digital currency is putting down some very strong roots.
The repeated validation of the support suggests that the digital currency is building a strong foundation. He believes a bullish reversal is imminent if the structure holds, especially as momentum and historical price behavior support a potential break from the area. - BTCEarth
BTCEarth cautions you not to confuse today’s upward trend for the start of a new bullish cycle. They liken it to Bitcoin’s trajectory in the second half of 2021, when expectations were through the roof.
These inflows from STHs have dropped from nearly 17,000 BTC in November to about 9,000 BTC in more recent weeks. This decline indicates that short-term holders have been increasingly disincentivized to trade. Perhaps more importantly, it would signal a fundamental shift in their market sentiment or investment strategy.
Crazzyblockk, a CryptoQuant analyst, pointed out that the market risk is still high. Moreover, he noted that just 24% of Bitcoin’s circulating supply is in an unrealized loss right now.
Currently, only 24% of the circulating supply is in an unrealized loss, a relatively low level historically associated with early-stage corrections rather than full-scale capitulation. - Crazzyblockk
Over the past 20 years, this magnitude of unrealized loss would be considered low in the aggregate. It’s better known as an indicator of early-stage corrections but not full-scale capitulation events. Furthermore, the unrealized loss part is bunched up along the old floor area.
The lack of widespread loss realization suggests that the market has not yet entered a high-conviction re-accumulation phase. In such an environment, reactive trading could lead to suboptimal outcomes. - Crazzyblockk, CryptoQuant analyst
Darkfost further observed that on-chain data shows the average realized prices for STHs today are about $92.8k. A surprising number of recent sellers have moved on at a loss. This can be seen in that short-term holders (STHs) average realized prices are much higher than the current market price.
Though Turkish markets are prone to sharp transitions, as Mevsimi explained, it took a real structural shift against the archetypical pattern of consolidation followed by animal spirits. This indicates that important market shifts tend to happen only following long stretches of relative market calm.
