Significant Bitcoin Sell-Off Likely as Traders Cash Out Profits: Bitfinex Exchange
Last week, Bitcoin soared to a new all-time high, marking a significant recovery from the lows seen in April. This rally, characterized by its speed and consistency, has resulted in Bitcoin logging its seventh consecutive weekly green close, marking the longest such streak since October 2023.
However, a recent report by Bitfinex Alpha suggests that this streak could come to an end soon. Traders are beginning to take profits, which could potentially weaken Bitcoin's momentum. Moreover, an unfavorable macroeconomic environment, triggered by tariff tensions in the United States, may further hamper Bitcoin's growth.
Within 36 hours of reaching its new all-time high, Bitcoin experienced a slight correction, dropping below its previous high of $109,590. This retracement was due to renewed concerns about global trade wars, instigated by U.S. President Donald Trump's proposal of 50% tariffs on European Union imports.
While the impact of Trump's tariff announcement was felt across cryptocurrencies, the Bitcoin perpetual futures market witnessed a significant unwinding of excessive leverage. This added to the downward pressure on Bitcoin and increased the likelihood of a short-term corrective move.
Although it remains to be seen if Bitcoin will stabilize above its recent weekly lows, profits taken by short-term holders could lead to a more pronounced correction. This is because investors tend to realize their gains when Bitcoin appreciates at such a rapid pace.
According to Bitfinex, there will be two types of sellers. These are investors who bought Bitcoin at a dip and have profits to book, and those who were in losses during the last correction and have now moved above breakeven. These groups of investors are already taking profits, as evident from on-chain data.
As Bitcoin recovered and rallied past $93,400, the short-term holder (STH) cost basis, profit-taking escalated. In the last 30 days, STHs have realized at least $11.4 billion in profit, with a daily peak of $747 million. This figure contrasts sharply with the $1.2 billion in cumulative profit realized in the previous 30-day period.
Furthermore, the surge in profit-taking is visible in the STH Realized Profit/Loss Ratio, which has risen to a level only seen on 8% of trading days in Bitcoin's history.
"This dramatic shift highlights how quickly investor sentiment and behavior can change when momentum returns," Bitfinex analysts stated. "However, it also suggests that some consolidation is likely as the market absorbs this wave of distribution before attempting another leg higher."
[Context for readers: The MVRV Ratio, mentioned but not explicitly integrated into the article, is a metric used in Bitcoin analysis to measure the average percentage gap between the market price and the realized price for all coins. A high MVRV Ratio can indicate overvaluation, potentially signaling a market top.]
[footnote 1: Recent data shows that Bitcoin profit-taking has increased, particularly as prices approach new highs. However, this profit-taking is still considered modest, with no strong indications of a bearish trend forming in the market.]
[footnote 2: Glassnode warns that Bitcoin's steady rally to new highs may face significant headwinds, particularly around the $120,000 price level. This is due to historical trends suggesting increased sell-side pressure at this level, driven by investor profitability and on-chain metrics like the MVRV Ratio.]
[footnote 3: Whale accumulation remains a significant force in driving prices higher. The accumulation trend score is high at 0.88, indicating that large entities are continuing to buy, which could support the price above $100,000.]
[footnote 4: Despite profit-taking, the $108,000 support level is critical for Bitcoin. A decisive breakdown below this level could lead to trouble for the asset. Similarly, the $120,000 level is seen as a potential point for increased sell-side pressure, based on historical trends. The MVRV Ratio is a metric used in Bitcoin analysis to measure the average percentage gap between the market price and the realized price for all coins.]
[footnote 5: Bitcoin's current market dynamics are characterized by a mix of bullish sentiment driven by whale accumulation and caution due to macroeconomic uncertainty and rising profit-taking activity.]
- The report from Bitfinex Alpha suggests that Bitcoin's current streak of weekly green closes might end soon, with traders starting to take profits and potentially weakening Bitcoin's momentum.
- The growing profit-taking activity, evident in the increase in short-term holder profits, could lead to a more pronounced correction in Bitcoin, as investors tend to realize their gains when Bitcoin appreciates rapidly.
- The surge in profit-taking is visible in the Short-Term Holder (STH) Realized Profit/Loss Ratio, which has risen to a level only seen on 8% of trading days in Bitcoin's history, indicating a notable shift in investor sentiment and behavior.
