What’s Happening
Price Action
Bitcoin continued its drop over the past week and is down -10.42%. In this week's Big Story below, we will explore the drivers of this sustained move below $100k.
Figure 1: BTC price has continued to fall over the past week.
Much of the gains of the past 12 months have now been wiped out, with a gain over that time period of just +6.53%.
Figure 2: BTC performance over the past 12 months.
From a technical perspective BTC price has dropped below the 1yr MA. Until this is reclaimed, conditions are bearish. The 1yr MA has held as support in bull markets throughout Bitcoin’s history, so this break below has to be seen as bearish until it can be reclaimed.
It is worth noting that BTC is currently at a daily support level, but any bull market enthusiasm cannot realistically return until the 1yr MA is reclaimed.
Figure 3: BTC 1-year moving average support lost for now.
The Big Story: What’s Driving The Drop?
Bitcoin price has been struggling in recent weeks, and there are some key drivers forcing BTC to remain under $100K in the near term at least.
1. Reduced expectation of a near-term rate cut
The markets had been pricing in further cuts before year-end, but that probability has now dropped to around 47% for a rate cut at the Federal Reserve’s December meeting (down from around 67% last week).
Figure 4: Fed rates have been dropping.
As a result, Bitcoin as a risk-on perceived asset has sold off.
2. Long-term holder selling
In addition, long-term holders shed sizeable amounts of Bitcoin, approximately 815,000 BTC (≈ US$79 billion) in the past month.
This selling is visualised on the HODL Waves chart. The darker colours show BTC that has been held for longer periods of time, with purple being bitcoins held for +10yrs. As those darker colours drop on the chart it shows that longer term holders are moving their bitcoin - most likely to be sold.
Figure 5: HODL waves
There has been a clear downtrend over the past year as long-term holders sell.
We can’t know the specific reasons why these long-term holders are selling without speaking to each individual investor. Potential reasons could range from: realising gains for life purposes, concerns around the institutionalisation of Bitcoin, or worries about the broader economy.
3. Money flowing into non-crypto sectors
Flows for Bitcoin-linked ETFs have continued to be weak recently: last Thursday’s net outflows reached around US$866.7 million from spot Bitcoin ETFs.
Figure 6: Recent Outflows from Bitcoin ETFs accelerating.
All while non-crypto sectors such as AI and quantum-computing are gaining more mind-share and investment attention.
Conclusion
Overall, the convergence of weaker rate-cut hopes, elevated supply from large holders, and a shift of capital away from crypto in the near term are weighing heavily on the momentum for Bitcoin. We may see BTC remain range-bound until one of these headwinds changes.
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The Bitcoin Magazine Pro Team.