Last week, Bitcoin (BTC) rallied above $44,000 but faced significant resistance near $45,000 and crashed.
According to a report from an analyst at market analysis platform CryptoQuant, profit-taking by a certain cohort of investors may have caused the price of BTC to decline.
BTC’s short-term retracement
CryptoQuant analyst Yonsei discovered through an analysis of on-chain data that when BTC price broke through the $40,000 resistance, short-term holders and the 6-18 month investor cohort showed an attempt to realize profits .
The profit-taking moves were evident in the Bitcoin Binary Coin Days Destroyed (CDD), a metric that measures the weight of coins that have remained unspent for an extended period of time by taking the total value of the number of days between when the asset was issued, calculated and issued.
A rise in binary CDD indicates that a large supply of BTC or those stored for a relatively long period of time have been issued. Yonsei noted that binary CDD was also active during the BTC rally in early December, indicating recent activity from short-term holders.
The profit-taking trend is underpinned by the fact that the majority of BTC holders are making profits. Bitcoin's Spent Output Profit Ratio has long been above one, showing that around 90% of holders are making profits.
Profit taking by miners and whales
While short-term holders sold their BTC at high profit margins, a cohort of long-term holders with six-month-old Bitcoins sold their Bitcoins just before the cryptocurrency's price crashed from $44,000. On the other hand, long-term holders remained adamant about their positions, refusing to sell their assets and anticipating higher price levels.
CryptoQuant revealed in its last weekly report that the crypto market was facing selling pressure from Bitcoin miners and whales. Heavy miner outflows last week showed miners selling more assets as BTC rose to $44,000 with an average profit margin of 40%.
Although the bear market is now a thing of the past and liquidity conditions in the crypto market are improving, Bitcoin is still settling around $41,000, about 6% below its recent peak of $44,180. Data from CoinMarketCap shows the leading digital asset has fallen 1% over the past 24 hours and was trading at $41,300 at the time of writing.
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