Key Takeaways
Why is Bitcoin struggling to maintain an uptrend?
Institutional interest has weakened, with negative Coinbase Premium and rising ETF outflows indicating bearish sentiment.
Can Bitcoin bounce back despite current market weakness?
Yes, the strong conviction of long-term holders and continued foreign exchange outflows indicate potential for a near-term recovery.
Since the sell-off in October, Bitcoin [BTC] has struggled to maintain an uptrend and traded within a descending channel. In fact, at the time of writing, Bitcoin was trading at $96,918, down 13.54% on the monthly charts, reflecting the intense bearish pressure.
Amid this bearish situation, the question is what is behind it and whether recovery is in sight.
Why is Bitcoin struggling?
Bitcoin has been struggling lately as interest from institutional investors has dropped sharply.
For starters, the Coinbase Premium Index has remained negative for two consecutive weeks, hitting a low of -0.077 at the time of writing.
Source: CryptoQuant
If this statistic is negative, it indicates an apparent lack of enthusiasm, especially among US investors and institutions.
Surprisingly, even after the government shutdown ended a few days ago, this metric has not yet turned positive. Instead, the price has continued to decline, which is a clear bearish signal for Bitcoin’s recovery.
Source: CryptoQuant
At the same time, the Coinbase Premium Gap has also fallen for two consecutive weeks, reaching a low of -77.
Such a sharp decline indicates increased selling pressure from the US market as investors reduce risk, further confirming this bearish stance.
Furthermore, Bitcoin US spot ETFs have recorded larger outflows. As such, the Netflows ETF has fallen to -$866.7 million, hitting its February low.
Source: CoinGlass
With ETF outflows dominating the market, it signals that funds are being sold. Historically, the last time BTC saw such ETF outflows, Bitcoin took two months to recover, which is a clear warning of the prevailing market weakness.
Long term holders remain strong!
Interestingly, despite the current bearishness, long-term holders have held firm, giving Bitcoin a lifeline.
Profit taking by long-term holders has fallen significantly, with realized profits falling from 12,000 BTC to 8,000 BTC, a decrease of 4,000 BTC.
Source: Checkonchain
This implies that LTH, while still making a profit, has no meaningful incentive to continue closing their position.
As a result, the long-term holder’s sell risk has fallen to 0.0047, hitting a monthly low. Often a decline here means that LTHs are less likely to be sold under current market conditions.
Source: Checkonchain
So LTHs have a lot of confidence in the market and expect prices to recover, which is a clear bullish signal.
A recovery or a further dip for BTC?
Bitcoin’s potential recovery is undoubtedly in a tough spot, with the market structurally bearish amid reduced capital flows from institutions and ETFs.
These conditions position BTC for further losses if they continue. So if these conditions continue, we could see Bitcoin fall to $93,482.
But as incentives to sell diminish, long-term holders of BTC with STHs offer a potential recovery.
Coupled with this, stock market activity over the past five days has led to reduced selling and increased buying. As such, Spot Netflow has remained negative for the past five days.
Source: CoinGlass
At the time of writing, Netflow fell to -$448 million, due to higher outflows. Often, higher withdrawals accelerate upward pressure, causing prices to rise.
If long-term holders remain steadfast and stock market participants continue to buy the dip, Bitcoin could quickly recover from this downturn.
A recovery would likely see BTC reclaim $99,690 and potentially set its sights on the $103,000 mark in the near term.