Bitcoin Profit-Taking Metric Shows Double-Digit Drop Ahead of Potential Rally, Says Analyst

December 30, 2024February 6, 2025 moneymetrics.org_admin Cryptocurrency

On December 17th, Bitcoin’s price made a new all-time high of $108,365 before dropping below $105,000 just two days later. The short-term volatility was anticipated by the market ahead of the United States Federal Reserve’s interest rate announcement on December 18th, which is expected to be a 25-basis-point cut.

Table of Contents

Despite Short-Term Volatility, a Bullish Scenario Takes Shape

One crypto analyst highlighted a bullish scenario taking shape for long-term Bitcoin holders. According to this analyst, the short-term drop in price was followed by a profit-taking frenzy among these investors. The magnitude of profit-taking has cooled down significantly over the past three weeks.

Bitcoin LTH Profit-Taking Drops from $10 Billion to $3 Billion

In November 2024, Bitcoin registered a surprising return of 37%, reaching a new all-time high that was followed by a profit-taking frenzy. Selling pressure reached 366,000 BTC per month in November, estimated to reach around $10 billion.

However, the analyst highlighted that the magnitude of profit-taking has significantly cooled down over the past three weeks. The profit realized by long-term holders dropped from $10 billion on Nov. 25 to $3 billion on Dec. 14, even though BTC prices rallied 12% during that time period.

Analyst’s Insights: Long-Term Holders Ready for Further Increases

Percival, a verified Bitcoin analyst on CryptoQuant, highlighted the decrease in profit-taking among long-term holders:

"This means that LTH [long-term holders] has realized most of its profits at this stage and is ready to see further increases."

Market vs. Realized Price Gradient Oscillator Chart: Neutral Position

The analyst also used a 90-day market vs. realized price gradient oscillator chart to demonstrate the potential for an upward phase in Bitcoin’s price. The index is in an equilibrium zone of 0.5, indicating a neutral position between buyers and sellers.

Strong Balance Between Buyers and Sellers

A strong balance between buyers and sellers demonstrates the potential for an ‘upward phase’ as the crypto asset is neither overbought nor oversold.

Related: Bitcoin Funding Rate Signals No Signs of ‘Late-Cycle Overheating’ — Analyst

Bitcoin’s price diverges with Coinbase premium

Despite the positive development of decreased profit-taking and a neutral trend, it is essential to note that the Coinbase premium has been falling since the beginning of December. Yonsei Dent, a pseudonymous crypto trader, highlighted that over the past two weeks, the premium has been on a ‘notable decline’ with respect to BTC prices.

Investor Caution Advised

The inverse correlation suggests that BTC’s rally was not supported by demand from US investors. The analyst added:

"It could indicate underlying weakness in medium-term upward momentum. Investors should remain cautious and monitor this development closely."

Bitcoin Price Action: Following Last Year’s Trend?

Regardless of its choppy market structure, Daan Crypto, an independent crypto trader, stated that Bitcoin had followed last year’s price action. The trader expected the price to chop further as 2024 wraps up before an ‘actual breakout’ in Q1 2025.

Conclusion: Long-Term Holders Positioning Themselves for Future Gains

In conclusion, despite short-term volatility, a bullish scenario is taking shape for long-term Bitcoin holders. The decrease in profit-taking and the neutral trend indicate that these investors are positioning themselves for future gains. However, investor caution is advised due to the potential underlying weakness in medium-term upward momentum.