What the whale situation could mean for the market

Retail traders are selling Bitcoin at a loss, while long-term holders remain inactive, analysts say, which could tighten supply conditions.

Bitcoin is trading near the $70,000 mark, and data on the chain shows a widening gap between retail investors throwing away their points and long-term holders staying completely calm.

This distribution is attracting the attention of analysts, who say that this pattern could create conditions for a supply squeeze.

Stocks fall as small holders sell

According to analyst GugaOnChain, since the beginning of the year, Bitcoin exchange reserves have decreased by about 204,000 BTC, from 2.99 million to 2.786 million BTC. This means there are fewer units for sale on the exchanges, even if short-term holders unload their stock.

The analyst noted that a metric that tracks whether new buyers make or lose when they sell, known as the short-term leveraged equity ratio (SOPR-STH), stands at 0.97. According to them, a reading below 1.0 means that holders are in the red, which could be because they are selling out of panic rather than as part of a strategy.

Meanwhile, the long-term sharks aren’t moving, and GugaOnChain notes that older coins, many of which are sitting on huge windfalls, haven’t been touched. According to an on-chain technician, the selling pressure at this stage is “purely emotional”, mostly driven by newer traders who bought their BTC at a higher price and are now cutting losses.

Market update from CryptoQuant contributor burakkesmeci added a related data point. They wrote that bitcoin sharks, who have held the cryptocurrency for less than 155 days, are sitting on an average value of about $85,600. And with BTC trading well below that level, that means those newer whales are underwater.

According to the analyst, Bitcoin bull cycles will resume only after the price recovers and is held above the value of this group.

You may also like:

“Looking at Bitcoin cycles, the pattern is consistent,” they wrote. “When the price falls below the price of STH sharks, the bear season begins – when the price recovers and stays above it, the bull season begins.”

Apparently, this level was tested in January but held as resistance and subsequently pushed BTC to the $60,000 level.

The stress test passed, but questions remain

Last weekend gave the market an unexpected data point when oil prices rose sharply, but Bitcoin remained above $70,000. Fundstrat’s Tom Lee said this is a sign that Bitcoin is “coming back into vogue as a store of value”.

The debate got a brief test yesterday, when the cryptocurrency rallied from around $69,000 to $71,200 after US President Donald Trump claimed on social media that there was “nothing to target” in Iran. Within minutes, his comment added nearly $2,000 to the price of BTC, although it later reversed.

At the time of writing, price data from CoinGecko shows that Bitcoin is down 3.7% over the past seven days, underperforming the broader crypto market, which is down about 1.7% over the same period. Meanwhile, one-year returns are at -15%, and Bitcoin is also sitting around 45% below its all-time high.