Bitcoin Struggles to Maintain Momentum as Miners Sell Off and ETF Demand Declines
After an impressive 27% surge in February, pushing Bitcoin (BTC) to a three-year high of $52,985 on February 20, the cryptocurrency is facing challenges in maintaining its upward momentum.
Bitcoin miners are increasing profit-taking ahead of the upcoming halving event, while a decrease in ETF inflows threatens to dampen the BTC price rally.
On February 21, the price of Bitcoin dipped to $50,664, causing concerns of widespread liquidations as bears attempted to break below the $50,000 mark for the first time since the Valentine’s Day rally. Market data reveals that the selling trend among Bitcoin miners, coupled with a slight dip in ETF inflows this week, has contributed to the pullback.
Despite a quick rebound towards $51,500 on February 22, a closer analysis of the on-chain data suggests that the bull rally is not yet back on track.
Cryptoquant’s miner reserves metric tracks the real-time balances held by BTC miners. According to the metric, BTC validators currently hold a cumulative balance of 1,824,201 BTC as of February 22, representing a decline of 160,000 BTC since January 31.
With a value of approximately $51,500 per coin, the 160,000 BTC that were recently traded are worth around $8.2 billion. Notably, the chart highlights how miners intensified their selling frenzy by $102 million after BTC reached a local peak of $52,858 on February 15.
Typically, a sell-off among miners indicates a bearish sentiment among a significant group of stakeholders. With about 10% of the total circulating supply under their control, BTC miners hold significant influence over Bitcoin’s price movements.
Without a corresponding surge in demand, it is not surprising that the recent wave of miners selling off coins has coincided with a decline in Bitcoin prices to a weekly low.
The BTC price rally in the first half of February was largely attributed to record-breaking inflows into the Bitcoin ETF. However, there has been a decline in ETF demand this week, combined with miners intensifying their selling spree ahead of the halving event.
These two critical factors have played a pivotal role in pushing the BTC price towards $50,000 instead of breaking out towards a new all-time high above $60,000, as anticipated by the bulls during the rapid accumulation leading up to the ETF trading hours on February 19.
With dwindling ETF demand and miners’ increasing selling frenzy, it is likely that the BTC price will hold above $48,500 even if it loses the psychological support level of $50,000 in the short term.
The 20-day Simple Moving Average (SMA) price, currently at $48,560, is a crucial support level below the $50,000 threshold.
This suggests that if the price drops below $50,000, the $48,560 level may serve as a significant area of support, potentially halting further downward momentum.
On the other hand, if bullish momentum prevails and Bitcoin reclaims the $53,000 level, the upper Bollinger band indicates that bears may reemerge, creating a sell-wall around $55,830.
This signifies a key resistance level that could impede upward movement, potentially leading to a consolidation phase or a pullback.
Given these technical dynamics, strategic swing traders may consider setting short-term stop-loss orders around the $45,000 area to manage risk in case of a breakdown below the $48,560 support level.
Conversely, bullish traders may target take-profit orders around the $55,000 mark, anticipating potential resistance near $55,830 and aiming to capitalize on any further upward movement.
Analyst comment
Negative news.
As an analyst, the market is likely to experience increased volatility in the short term due to selling pressure from Bitcoin miners and a decline in ETF demand. The BTC price may hold above $48,500 but could face resistance around $55,830, potentially leading to a consolidation phase or pullback. Traders may set short-term stop-loss orders around $45,000 and target take-profit orders near $55,000.
