Key takeaways:
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Bitcoin has dropped 14% from its $124,500 all-time high, which led to a drop in BTC supply in profit, signalling market exhaustion.
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The $112,000-$116,000 supply zone must be overcome to start the next leg higher.
Bitcoin (BTC) dropped 14% from its $124,500 all-time high to a seven-week low of $107,400 on Saturday. This correction saw the market transition into widespread net distribution, causing the “euphoric phase” to cool, according to new analysis.
Bitcoin’s drop to $107,000 suggests “exhaustion”
The rally to new highs in mid-August pushed 100% of Bitcoin supply into profit, according to data from Glassnode.
Sustaining such periods requires persistent capital inflows strong enough to offset relentless profit-taking, a situation that rarely endures for long.
“This behaviour is often captured by the 0.95 quantile cost basis, the threshold above which 95% of supply is in profit,” Glassnode said in its latest The Week Onchain Report.
Related: Bitcoin set to beat ‘red September’ dip for third straight year
The most recent euphoric phase lasted about 3.5 months, with more than 95% of the supply in profit.
Still, Bitcoin fell back below this band on Aug. 19 as “demand finally showed signs of exhaustion,” the market intelligence firm said.
At present, 90% of Bitcoin in supply is in profit, which is between the 0.85 and 0.95 quantile cost basis, or in the $104,100–$114,300 range.
“Historically, this zone has acted as a consolidation corridor following euphoric peaks, often leading to a choppy sideways market,” Glassnonde wrote, adding:
“Breaking below $104.1K would replay the post-ATH exhaustion phases seen earlier in this cycle, whereas a recovery above $114.3K would signal demand finding its footing and reclaiming control of the trend.”
Similarly, the percentage of short-term holder supply in profit collapsed to just 42% from above 90%, indicating a textbook cooling-off for the market.
Glassnode further explained:
“Such sharp reversals typically provoke fear-driven selling from top buyers, which is then often followed by exhaustion of the very same sellers.”
With the recent BTC price rebound to $112,000, more than 60% of short-term holder supply is back in profit. However, this comeback remains fragile, according to Glassnide.
“Only a sustained recovery above $114K–$116K, where over 75% of short-term holder supply would return to profit, could provide the confidence necessary to attract new demand and fuel the next leg higher.”
Bitcoin’s main resistance remains $112,000
Bitcoin’s relief rally stalled at $112,000 multiple times this week, indicating that the bears are aggressively defending this level.
The price faces stiff resistance from the $111,700-$115,500 supply zone, which is also the 100-day simple moving average (SMA) and the 50-day SMA, as shown in the chart below.
Bulls must turn this area into new support to confirm the end of the correction, or risk further downside in the near term.
Bitcoin has “been consolidating below its previous local range and has failed to retake it,” trader and analyst Daan Crypto Trades said in an X post on Thursday.
“A move back above $112K and holding there would be good in the short term.”
As Cointelegraph reported, there is stiff resistance from the 20-day exponential moving average (EMA) at $112,438, which Bitcoin price must overcome to confirm higher lows.
Such a move would suggest that the corrective phase may be over. The BTC/USD may then attempt a rally toward the all-time highs.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
