Bitcoin [BTC] has experienced significant volatility over the past few days. On August 21, the price of Bitcoin reached $61,800, but fell to $59,700 a few hours later.
These price movements were likely driven by the liquidity pools that have built around BTC over the past week.
The cumulative increase in liquidity levels is hugely positive, suggesting that prices will correct in the near term, thereby flushing out overeager bulls.
Short-term holder cost basis will be a strong barrier
The actual price of short-term Bitcoin holders can be used to mark resistance zones. Short-term holders are those who hold BTC in their wallets for less than 155 days.
By UTXO age range, he observed that the average cost basis of the 1-3 month BTC holding group was $64,000. Similarly, the average cost basis of the 3-6 month group was $66,000.
As the market price is below this area, most holders are likely to be stuck in losses.
Therefore, a price rally into this area could cause underserved holders to exit the market closer to breakeven, thereby exacerbating selling pressure.
BTC’s price has been range-bound in recent months, which means a move towards $66,000 could also be a good profit opportunity.
Assess whale aggregation/distribution trends
Wallets holding 10,000-1 million BTC experienced a sustained accumulation phase from early December 2023 to late January 2024. During this period, the price of the king of cryptocurrencies increased by 16%.
Fast forward to March, BTC rallied another 70%, but at the same time, the BTC whale community (those holding 10,000+ coins) distributed and took profits during the rally.
Likewise, this group of whales has also been going through a distribution phase over the past six weeks, despite Bitcoin’s lackluster price performance.
This means that prices are expected to fall and continue to fall.
The 1-month liquidations heatmap shows the range potential more clearly. Deep liquidity at $63,000, $67,000, and $70,000 is likely to attract price in the coming weeks.
However, liquidity accumulation at $54,000 and $49,000 south are also important magnetic zones. As things stand, price action and whale accumulation trends are not favorable for a breakout above $66,000.
