Bitcoin Selling Pressure Eases: Are We on the Cusp of a Rally?

Bitcoin’s (BTC) price has dropped nearly 1% today, contributing to an overall decline of 3.6% this month. However, two crucial metrics indicate that selling pressure may be diminishing.

Key Takeaways

Bitcoin's price has decreased by 3.6% this month, but metrics suggest declining selling pressure.
The Coin Days Destroyed (CDD) metric shows long-term holders are less frequently selling their Bitcoin.
ETF outflows are decreasing, indicating a potential shift in market dynamics.
Analysts remain cautious, with a true rally likely dependent on stronger demand and improved market sentiment.

As conditions change, both market participants and analysts will be watching closely to see if these indicators lead to a significant price rally for Bitcoin in the near future.

Despite this positive signal, some analysts warn that buyer enthusiasm remains subdued, limiting the potential for a major price increase in the near term.

Reduction in Bitcoin Selling Pressure: Key Metrics

Recent analysis from CryptoQuant reveals a notable decrease in Bitcoin’s Coin Days Destroyed (CDD) metric. To clarify, CDD measures the duration Bitcoin remains unspent before being transferred. A rise in CDD typically indicates that long-term holders are offloading their assets, while lower CDD levels imply these holders are retaining their investments.

“We are now over a month past the significant BTC movement from Coinbase. Consequently, averaged data is gradually normalizing. Examining Coin Days Destroyed (CDD), we can see a substantial drop following that occurrence. Notably, this decline has reached levels significantly lower than the previous spike,” stated analyst Darkfost.

Bitcoin’s Declining CDD

Darkfost pointed out that this trend suggests reduced activity among long-term holders, resulting in Bitcoin being less frequently traded among older wallets. He further explained that this ongoing decline in long-term holder selling pressure could relieve market stress and, if sustained, might facilitate the formation of a market bottom.

Another indicator comes from Bitcoin's exchange-traded fund (ETF) flows. Since early November, the 30-day moving average (30D-SMA) of net inflows into Bitcoin ETFs has consistently shown negative figures, indicating continuous net outflows. However, the severity of these outflows has been diminishing, with the 30D-SMA approaching neutrality, hinting at reduced ETF outflows compared to earlier periods.

Bitcoin ETF Netflows

Supporting this trend, data from SoSoValue reveals that total net outflows peaked at $357.69 million on December 15, only to decrease to $277.09 million on December 16 and further down to $161.32 million by December 18. Outflows dipped again to $158.25 million on December 19 and $142.19 million on December 22. Although the daily outflow figures have lessened, this does not confirm any definitive change in trend direction.

Meanwhile, analysts at 10x Research have noted changing market conditions. The firm, which has maintained a bearish stance since October, sees shifts in derivatives, ETFs, and technical indicators occurring.

“After being bearish, this is the day and time we will consider buying Bitcoin. The largest Bitcoin options expiry ever recorded is approaching. Analysis of strikes and open interest reveals potential stress and opportunity. Moreover, historical year-end patterns suggest that periods of great caution can lead to sharp sentiment shifts once new calendars and risk budgets are established. Evolving technical conditions are hinting that the balance between downside pressure and potential upside is becoming more intricate,” their recent post highlighted.

Despite these indicators, a price increase will likely hinge on a more robust and steady return of demand. BeInCrypto reported that stablecoin reserves across major exchanges have drastically decreased, with capital outflows around $1.9 billion in the last month. This decline hints at reduced immediate buying capacity and ongoing caution among market players. Additionally, CryptoQuant CEO Ki Young Ju has remarked that a recovery in market sentiment might take several months.