What Whale Dormancy Could Mean for the Market

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

Bitcoin is trading near the $70,000 mark, with on-chain data showing a widening gap between retail investors dumping their holdings and long-term holders staying put.

That divergence is drawing attention from analysts who say the pattern could set up conditions for a supply squeeze.

Exchange Stocks Fall While Small Owners Sell

According to analyst GugaOnChain, since the beginning of the year, Bitcoin exchange positions have decreased by about 204,000 BTC, from 2.99 million to 2.786 million BTC. This means that there are fewer units available in the trade for sale, and even short-term owners are pulling out their stash.

The analyst pointed out that the metric that tracks whether recent buyers gain or lose when they sell, known as the Short-Term Holder Spent Output Profit Ratio (SOPR-STH), is at 0.97. According to them, a reading below 1.0 means that participants are in the red, possibly selling out of panic rather than as part of a strategy.

Meanwhile, long-term whales are not moving, GugaOnChain points out that older coins, many of which are sitting on huge unrealized gains, have not been touched. According to an on-chain expert, the selling pressure at this stage is “completely emotional,” driven mainly by new traders who bought their BTC at high prices and are now cutting losses.

A market update from CryptoQuant contributor burakkesmeci added a related data point. They write that the Bitcoin whales who have held the cryptocurrency for less than 155 days are sitting on the basis of the estimated cost of $85,600. And with BTC trading below that level, it means those new whales are underwater.

According to the analyst, the cycles of Bitcoin bulls resumed when the price was again demanded and above the cost base of this group.

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“If we look at Bitcoin cycles, the pattern is consistent,” they wrote. “When the price falls below the cost basis of the STH whale, the bear season begins – when the price rises again and above it, the bull season follows.”

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

Stress Test Passed, But Questions Remain

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

That argument received a brief test yesterday, when the cryptocurrency king hit between $69,000 and $71,200 after US President Donald Trump said on social media that there was “nothing left to target” in Iran. In a few minutes, his comments added almost $2,000 to the price of BTC, although it later reversed.

At the time of writing, price data from CoinGecko showed 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, the one-year return is -15%, and Bitcoin is also sitting about 45% below its all-time high.