As attention turns to altcoins, Bitcoin (BTC) has seen a pause in its upward trend over the past month. It is currently trading 3.8% below its all-time high of $99,540, raising questions about the sustainability of this growth and the likelihood of a pullback as the year comes to a close.
Investors flock to Ethereum and XRP
Chris Newhouse, research director at Cumberland Labs, pointed out that while strong institutional buying pressure remains (especially from companies like MicroStrategy that continue to accumulate Bitcoin), there has been a notable shift in capital flows.
Newhouse noted that the broader crypto ecosystem is experiencing a 'diversification of capital flows' from both institutional and non-institutional participants.
This diversification suggests that as Bitcoin stabilizes, investors' interest is increasingly shifting towards other digital assets, including Ethereum (ETH) and XRP, which had previously lagged behind Bitcoin.
With the election of Donald Trump as president, who became a cryptocurrency advocate, expectations for more favorable regulations in the U.S. have risen. This drove XRP's price to surge significantly, with a monthly increase of 400%.
This optimistic sentiment is also reflected in the record monthly net inflows for Bitcoin and Ethereum exchange-traded funds (ETFs) in November, reaching $6.5 billion and $1.1 billion respectively. Bloomberg data shows that last Friday saw a historic high in the daily subscription volume for Ethereum ETFs.
$2 billion worth of Silk Road Bitcoin transferred to Coinbase
In the options market, the downside protection for Bitcoin expiring later this month has significantly increased. Meanwhile, BTC futures are showing moderate leverage, remaining relatively subdued after Bitcoin broke through the $99,000 mark.
Vetle Lunde, research director at K33, stated that on-chain data shows traders buying BTC in the $55,000 to $70,000 range are now actively taking profits. 'Profit-taking is particularly intense when BTC trades above $90,000,' Lunde said.
Wintermute OTC trader Jake Ostrovskis stated, 'The market has paused over the past 10 days as Bitcoin's price hovers slightly below $100,000. Volatility levels have compressed slightly, with Bitcoin at the 64th percentile and Ether significantly at the 81st percentile.'
This volatility compression indicates that traders are cautious in evaluating the next moves in the market, with BTC's price action possibly re-testing a new wave of lower support levels, which could jeopardize the milestone of reaching $100,000 by year-end.
According to a report by NewsBTC on Monday, nearly $2 billion worth of BTC previously seized from the Silk Road market has been transferred from the U.S. government wallet to Coinbase, further exacerbating market uncertainty.
Such moves often trigger speculation among traders, as large-scale liquidations by the U.S. government from similar actions led to a downward trend in the second and third quarters of this year, during which BTC fell more than 20% for two consecutive months.
At the time of writing, BTC is trading at $94,480, having declined by 0.5% in the past 24 hours.