This Week's Snapshot
Growing concerns about the Federal Reserve's potentially aggressive inflation control measures have impacted asset strategies across markets—including Bitcoin. The Fed's December meeting notes indicated possible balance sheet reduction by summer, tightening market liquidity earlier than expected. This shift triggered volatile equity markets and a six-day losing streak for Bitcoin.
Opening at $47,875 and closing at $40,672, this week tested bullish investors' resilience. Reminder: This analysis aims to objectively track market trends—not financial advice.
Tracking Long-Term Investors
Current prices have forced short-term holders to realize losses, while the ~$30,000 drop since December attracted speculators. Having previously analyzed short-term behavior, we now focus on Bitcoin's backbone: long-term holders.
Key Metrics Explained:
Long-Term Holder Net Position Change
- Positive (green): Accumulation phase (bear market)
- Negative (red): Profit-taking (bull market)
- Current trend: Green dominance post-November highs shows conviction during volatility.
VDD Multiplier
- Measures coin dormancy against annual averages.
- High values: Long-term sell-offs (bull markets)
- Low values: Holder inactivity (bear markets)
- November anomaly: Despite price peaks, VDD stayed neutral—fewer long-term exits than expected.
Dormancy Flow (Adjusted)
- Compares market cap to annualized dormant value.
- Current state: Historic lows often precede rebounds, suggesting potential market bottom.
👉 Why long-term holders matter for Bitcoin's stability
Futures Market Dynamics
While spot markets stagnated, futures saw dramatic shifts:
- Open Interest hit 264K BTC (+42% since December 4), likely driven by short positions betting on further declines.
- Leverage Ratio reached 1.98%—near the 2% threshold that typically triggers deleveraging events.
Liquidation Risks
- Long liquidations spiked to 69% (highest since May 2021).
- Low futures trading volume reduces market depth, amplifying potential squeezes if spot prices rebound unexpectedly.
Key Takeaways
- Short-term sentiment weak; long-term holders exhibit classic bear-market patience.
- Near-danger leverage levels could prompt forced liquidations.
- Futures market exposed to short squeezes if trends reverse.
The challenge for Bitcoin's foundation? Reigniting upward momentum while stabilizing for the next bull cycle.
FAQ
Q: Why are long-term holders critical?
A: They provide price stability during volatility by holding through downturns.
Q: What triggers a VDD spike?
A: Massive sell-offs of older coins—common near market tops.
Q: How could futures liquidations impact Bitcoin?
A: Forced closures may accelerate price swings, especially in thin markets.