Bitcoin Shows Seller Dominance as BTC Stays Below $90K

Summary:
Bitcoin has closed the year with a slight decline, indicating a potential shift in market dynamics. Recent data reveals that sellers are gaining control, and while the price remains above critical support levels, caution persists in the market.

Key Takeaways

Bitcoin's annual close showed a slight decline of around 6%, breaking its typical four-year cycle of one down year followed by three up years.
On-chain analysis reveals that aggressive buying peaked around the New Year, with market sentiment now leaning towards sellers.
The current market indicators suggest moderate sell-side pressure, yet there is no sign of severe capitulation at this stage.
Bitcoin's price is consolidating around the $88,000 to $90,000 range, facing resistance from key moving averages.
A breakdown below the $85,000 to $88,000 support could trigger further declines.

Bitcoin Data Shows Aggressive Sellers In Control As BTC Consolidates Below $90K

Market Overview: A Transition in Bitcoin Dynamics

Bitcoin wrapped up the previous year with a slight dip, signifying an unusual deviation from its established pattern of alternating years of gains and losses. The decline was minor at approximately 6% and pales in comparison to past downturns, but it carries significant implications. This downturn hints at a possible shift in market behavior rather than an indication of outright weakness.

Recent on-chain analysis conducted by Axel Adler offers relevant insights into this market transition. The analysis indicates that the peak of aggressive buying occurred around the New Year, which has since diminished. Currently, the balance of market sentiment has shifted towards a slight dominance of sellers, though this isn't extreme.

The indicator's current position in a moderately negative zone reflects increased selling pressure, yet it has not reached levels that would signal widespread capitulation. Historically, when market conditions resemble this, they often precede heightened sensitivity to price declines rather than immediate recovery trends. This suggests that while Bitcoin isn't experiencing a drastic decline, it is also lacking the robust momentum seen during more bullish phases.

In essence, the market is moving into a more intricate phase where the seller pressure is growing moderately, correlating with an atypical downward annual close.

Sell-Side Pressure Grows: Analyzing Short-Term Momentum

Adler's study emphasizes a marked shift in short-term market activity, particularly through the Bitcoin Net Taker Flow momentum metric. This measure captures whether traders are leaning more toward buying or selling positions. Unlike cumulative flow data, which reflects longer-term trends, this metric reacts quickly to changing trader sentiment.

Bitcoin Net Taker Flow 24H | Source: CryptoQuant

Recently, this momentum indicator has noticeably shifted into negative territory. After maintaining a positive stance in late December, it has now fallen to approximately -0.3. Although this doesn't signal extreme market stress, it firmly positions Bitcoin within a moderate bearish pressure environment. Notably, this downturn in momentum coincided with a decline in cumulative Net Taker Flow, reinforcing the bearish outlook.

When both cumulative and short-term momentum indicators trend downward together, they reflect a broader shift in trader behavior towards selling, rather than isolated fluctuations. According to Adler, the market could experience greater downside risk if momentum continues to decline, particularly if measurements breach the -0.4 level.

Overall, the current atmosphere depicts a controlled selling phase. Bitcoin is not in a capitulative state, but these combined signals indicate that selling trends now dominate the market, increasing its sensitivity to any downturns in price support.

Key Support Levels: Bitcoin's Price Action

Bitcoin is currently stabilizing in the range of $88,000 to $90,000 following a notable drop from its recent peaks. The market is caught in a precarious balance between stabilization efforts and ongoing downside risk. The price remains below both short and medium-term moving averages, which suggests that bullish momentum has yet to return.

The 50-period moving average has now become a dynamic resistance level, while the 100-period average is beginning to flatten, signaling a broader phase of market compression rather than an imminent rebound.

BTC testing key level | Source: BTCUSDT chart on TradingView

Crucially, Bitcoin continues to hold well above the 200-period moving average, which is still trending upward. This observation indicates that, on a longer timeframe, the overall market structure has not completely unraveled. However, the previous loss of the $100,000 to $105,000 zone has signified a shift from expansion to a phase of distribution, increasing the sensitivity to selling pressures.

Moreover, trading volumes have significantly decreased during this recent period of sideward movement, indicating a lack of strong conviction from both buyers and sellers. This further supports the idea that the market is adjusting previous excesses rather than shifting downwards aggressively. Persistent struggles to break back above the $92,000 to $95,000 range reveal weak demand at higher price levels.

As Bitcoin maintains its position near the $85,000 to $88,000 support band, consolidation appears to be the prevailing situation. Should the price drop below this band, it could potentially lead to deeper retracements.

Featured image from ChatGPT, chart from TradingView.com