Bitcoin’s (BTC) recent price action suggests that institutional investors have yet to make a strong comeback, leaving the market in a consolidation phase.
According to a report from Bitfinex, Bitcoin fell significantly from its all-time high of $109,590 on Jan. 20 to a low of $77,041 last week. This 29.7% drop marks the second deepest correction in the current bull market.
Historically, bull markets tend to experience corrections of around 30% before resuming their rise, according to Bitfinex. However, this cycle has been characterized by shallower pullbacks, largely due to institutional adoption and demand from spot Bitcoin exchange-traded funds (ETFs). Despite this, short-term holders are currently facing net unrealized losses, adding to the sell-side pressure. Investors who bought Bitcoin in the past 7 to 30 days are particularly vulnerable to capitulation, which further exacerbates market weakness, analysts say.
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A major concern highlighted in the report is the slowdown in fresh capital inflows. When new money enters the market lessens and cost basis trends shift, this is typically a sign of weakening demand. This is becoming more apparent as Bitcoin struggles to maintain key support levels. Without significant new buying activity, BTC could remain in a prolonged period of consolidation or face further declines as weaker holders exit their positions.
Market analysts suggest that the return of long-term holders and institutional demand will be critical in determining Bitcoin’s next move. If deep-pocketed investors begin to absorb supply at these low levels, it could signal the start of an accumulation phase, potentially stabilizing prices and shifting market sentiment back into bullish territory.
*This is not investment advice.