Amid a long-term bearish trend, Bitcoin [BTC] fell to a two-week low of $62,696 before recovering slightly. At the time of writing, BTC was trading at $63,376, down 3.49% from the daily charts, adding to the weekly losses.
With Bitcoin continuing to decline, analysts have predicted further losses, citing reserve risk indicators.
A continued downward trend ahead?
According to Alphractalreserve risk indicators have continued to decline, alongside falling prices.
Reserve risk and VOCDD/MVOCDD have both fallen, indicating a weakening alignment between price developments and long-term holders’ beliefs.
Source: Alpharactal
When reserve risk remains high, it generally indicates increased economic activity of older coins, indicating the distribution of long-term holders (LTH).
Looking back at previous cycles, these indicators have triggered four sell signals since 2024, each followed by a significant decline in the price of BTC. If LTHs increase spending during this current period of weakness, history suggests this pattern could repeat itself.
Is this cycle different?
While long-term holders have quietly exited the market, the continued price decline has left short-term holders demotivated from selling.
Looking at the short-term sell risk ratio, this metric has fallen in February, especially since BTC fell below $70,000. A decrease in sales risk for this cohort means that it is very unlikely that this group will sell under prevailing market conditions.
Source: Checkonchain
Because short-term holders are suffering significant losses, they currently have no incentive to sell, providing minimal relief to the market.
Importantly, Bitcoin’s recent dip has made it more accessible to small-scale investors, who have seized the opportunity to accumulate. Shrimp, Fish, and Crab cohorts all added more BTC than they sold.
Source: Checkonchain
As a result, their balance changes increased to 9.1k BTC, 16k BTC, and 6.2k BTC respectively, indicating steady accumulation. With small traders buying and short-term holders showing little incentive to sell, demand appears strong enough to prevent a sharp price crash.
Although the reserve risk indicators indicated a potential market decline, these two are therefore on the demand side, ready to absorb the pressure.
By doing this, BTC could avoid a significant drop, recover $68,000 and target $72,000 by the end of the month, according to the Future Grand Trend Indicator.
Source: Checkonchain
However, if the historical pattern holds, Bitcoin could break the $60,000 support level, especially with the RSIM Divergence Zone issuing a bearish signal.
Final summary
- The Bitcoin Reserve risk indicators continue to decline, indicating a weakened alignment between price and LTH beliefs.
- STH and retailers provide minimal relief and avoid a sharp price crash.