Bitcoin (BTC) has entered the new year maintaining a narrow price range between $85,000 and $90,000. This stability reflects a distinct balance of power between buyers and sellers in the market, indicating no clear directional decision has been made yet. However, on-chain data and technical indicators suggest this stagnation might be signaling an upcoming recovery. Recent reductions in selling pressure and shifts in investor behavior highlight Bitcoin’s position at a critical juncture.
Selling Pressure Diminishes; Accumulation Strengthens
Although the negative turn of the Sharpe Ratio in the Bitcoin chart initially suggests weakened risk-adjusted returns, this is not always interpreted negatively in crypto markets. Considering Bitcoin’s historical volatility, a negative Sharpe Ratio often coincides with accumulation phases. In the past 24 hours, BTC has moved within a narrow range of $87,550 to $90,900, reflecting ongoing uncertainty. Still, the liquidation of $31 million in Bitcoin contracts points to increased sensitivity in leveraged trades.
On-chain data paints a similar picture, showing a clear slowdown in long-term investors’ selling tendencies. The Long-Term Holder Distribution Pressure Index at -1.623 and only 221 BTC spent in the last 24 hours indicate limited new selling entering the market. Historically, these levels align with periods where investors prefer accumulation over panic. This scenario can set the stage for increased short position liquidations if there is an upward price reaction.
Bottom Signals and Market Dominance Capture Attention
The MVRV-Z score, another crucial indicator for Bitcoin, hovers near historical bottom zones based on the two-year average. This metric evaluates if the market value is excessively high or low relative to the realized value. Current levels mirror areas where recovery processes have begun in past cycles. Simultaneously, Bitcoin reserves on exchanges falling to approximately 2.5 million BTC suggest a decline in supply immediately available for sale, indicating that selling pressure may weaken further over time.
Meanwhile, Bitcoin maintains its dominance in the overall crypto market. With a total market value around $3.03 trillion, BTC’s share ranges between 58% and 60%. This scenario shows a preference among investors to remain with Bitcoin over altcoins. Recent reports from the US on spot Bitcoin ETF data highlighted more stable entries into Bitcoin ETFs compared to those based on altcoins. This trend supports the view that institutional interest remains heavily concentrated on Bitcoin.
Overall, although Bitcoin has yet to gain the momentum necessary for a robust short-term rally, existing data indicates that downside risks remain limited. The reduction in selling pressure, patient stance of long-term investors, and decreasing exchange reserves suggest that Bitcoin is working to establish a solid base. However, unless there is a broader expansion in market value, this accumulation phase may be prolonged over time.
