The second month of the year has kicked off decently for the cryptocurrency market, with Bitcoin, the most valued cryptocurrency by market cap, maintaining stability above the $40,000 price.

However, whether or not Bitcoin is poised to continue sustaining this momentum depends on a handful of technical and on-chain factors. From an on-chain standpoint, Cryptoquant, an on-chain analytical platform, is spotlighting the movement of short and long-term holders and how it outlines the possibility of a price rally.

Two important metrics in the Bitcoin market that are required to understand the current state of the market include Realized Dominance and Realized Cap.

Realized dominance, calculated using Realized Cap, is significant economic data used to distinguish the wealth held by short-term players and long-term holders. Historically, the data has proven to be highly practical for identifying market entry points at risky times. It can also be used to spot ideal conditions for understanding price bottoms in the long term.

Using this data, Cryptoquant found that dominance or cap rival held by short-term holders is currently at 35%. It bears mentioning that a 5% to 10% drop from the current percentage typically hints that Bitcoin’s price has bottomed.

As the on-chain analytical platform explained,

“Typically, during bearish market periods, price bottoms in Bitcoin have occurred when the share of short-term holders in Bitcoin holdings reached 20-25%. Potential market tops have been observed when the capital held by short-term holders peaked at 70-80%, considering this concept.”

While near-term price fluctuations cannot be calculated using the metrics, in the long term, Bitcoin still has a strong growth potential.

On the other hand, public sentiment is working in Bitcoin’s favour. According to a recent report shared by Santiment, the high ratio of crowd discussion towards Bitcoin, which is typically a sign of fear, seems to be beneficial for Bitcoin at this time.

“Historically, a high ratio of crowd discussions toward Bitcoin is a sign of fear. However, since mid-2023, the euphoria & optimism surrounding the ETFs has flipped high BTC discussions into a greed indicator due to (arguably) unrealistic expectations for markets.” The report reads. 

At report time, Bitcoin’s market cap and trading volume are trading downwards. Despite managing to stay above $40,000, the apex cryptocurrency has yet to clear out weekly and monthly losses. 

With increased selling pressure from the bears, Bitcoin bulls must regain the upper hand to sustain its press time price of $42,910.

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Filed under: Bitcoin - @ February 4, 2024 9:14 pm