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Stop Hunting Or Trend Reversal?

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Bitcoin (BTC) saw a sharp decline below $90,000 yesterday, raising concerns about its near-term stability. However, the cryptocurrency has since rebounded, trading back above $96,000 at the time of writing.

This rapid recovery has caught the attention of market analysts studying the situation Basic trends Driving Bitcoin price movements.

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Is Bitcoin Price Above $96K a Chase to Stop?

One of CryptoQuant’s contributors, Mignolet, shared an analysis highlighting the recent price dynamics. According to the analyst, Bitcoin’s recent drop to $89,000 and the current rebound were caused by a break of a key short-term support level.

Mignolet revealed that this pattern, referred to as a “stop hunting,” occurs when price movements temporarily break support levels before recovering. Despite the recovery, Mignolet stresses that a real trend reversal will require stronger participation from major market participants.

Mignolet’s analysis indicates significant selling activity among whale entities, as observed in Coinbase Premium Gap (CPG) data. Typically, whale buying steps in to absorb such declines, creating noticeable market volatility.

Coinbase Premium Gap (CPG). | Source: Cryptoquant

But this time such activity was absent, raising questions about the sustainability of the ongoing recovery. Additionally, Binance’s market buy ratio data indicates that large-scale buyers on the exchange have not benefited from the recent price action, indicating cautious sentiment among major players.

Additional evidence uncovered by Mignolet comes from data on daily inflows and outflows of exchange-traded funds (ETFs), which have not yet confirmed any major shifts in market dynamics.

While the daily candlestick pattern indicates a meaningful move, the lack of participation by whales may limit Bitcoin’s ability to sustain a long-term reversal. Mignolet also warned that market sentiment could turn optimistic too quickly without clear supporting data. The analyst noted:

While the candle pattern indicates a meaningful movement, the major players are not taking advantage of the opportunity. What worries me most is that many people’s feelings may quickly shift to relief too soon.

Bitcoin market performance

After experiencing a notable price drop yesterday that dropped below $90,000 and caused a total liquidation of over $300 million in the cryptocurrency market, Bitcoin is finally seeing a notable reversal in its downward trend.

Bitcoin (BTC) price chart on TradingView
BTC price is moving sideways on the 2-hour chart. Source: BTC/USDT TradingView.com

In particular, over the past day, Bitcoin has risen by 5.6% to reach $96,351, at the time of writing. However, despite this increase, the asset is still down approximately 10.8% away from its peak above $108,000 recorded last month.

While Mignolet’s analysis indicated that Bitcoin’s downtrend may not be over yet, it is worth noting that the asset’s current recovery coincides with a decline in selling activity from long-term holders.

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In a separate analysis, CryptoQuant contributor Darkfost open The net change in long-term holder positions (LTHs) over the past 30 days remains negative but shows signs of improvement. From a low of -827,000 BTC on December 5, the number improved to -246,000 BTC.

Change in the net position of Bitcoin long-term holders (LTHs).
Change in the net position of Bitcoin long-term holders (LTHs). | Source: Cryptoquant

This decrease in selling pressure indicates that LTHs are less inclined to sell at current price levels as the price of Bitcoin declines. However, Darkfost noted that for bullish momentum to regain strength, LTHs will need to shift towards accumulating rather than reducing sales.

Featured image created with DALL-E, chart from TradingView

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