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Selling pressure outweighs new capital flows; The current cycle is characterized by liquidations of institutions and a lack of buying interest.
The CEO of Cryptoquant, Ki Young Joo, stated that the current Bitcoin market is a confirmed cycle, warning that a real recovery could take months and prices may need to fall further before a sustainable recovery can be achieved.
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Capital flows cannot make a difference
in interview With a South Korean cryptocurrency media, Jo offers data-based reasons for the extended weakness. It indicated a fundamental imbalance between capital flows and selling pressure.
Hundreds of billions of dollars have entered the market, but the overall market capitalization has stopped or decreased, Gu said, adding that this means selling pressure is outstripping new capital.
He explained that previous sharp corrections usually require at least three months of consolidation before recovering investor sentiment. Joe insisted that any temporary upswing should not be considered a precursor to a new bull cycle.
Two paths to recovery
Joe reviewed two scenarios for a possible Bitcoin rebound. The first scenario involves prices falling towards the achieved price of around $55,000. This price is the average cost of keeping all Bitcoin holders, calculated from the transaction data on the chain, before recovery. Historically, Bitcoin needs to reach this level to generate new upward momentum.
The second scenario assumes a prolonged consolidation in the range of $60,000 to $70,000. Prices will remain trading sideways in this range for several months before the next rise.
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Key emphasized that the preconditions for a sustained bull run are not currently in place. ETF flows have stopped, orders in the over-the-counter market have stopped, and conventional and conventional market capitals have remained or declined.
The exit of the institutions is the reason for the decline
Joe attributed much of the recent selloff to institutions liquidating their positions. As Bitcoin volatility has decreased over the past year, institutions entering the market to exploit that volatility via neutral beta-delta strategies have found better opportunities in assets like the Nasdaq and gold.
When Bitcoin’s movement stopped, there was no longer any reason for institutions to hold these positions, Gu said. CME data shows that institutions have significantly reduced their short positions, which is not a bullish signal, but rather evidence of capital withdrawal.
Joe also noticed aggressive selling patterns where large amounts of Bitcoin were floated at market prices in very short periods of time. This is believed to indicate forced liquidations or intentional institutional selling to affect derivative positions.
The outlook for altcoins is more pessimistic
The landscape for altcoins looks bleaker. Joe noted that although altcoin trading volume looked strong throughout 2024, new capital flows were limited to a few tokens that had opportunities for ETF listing. The total market capitalization of altcoins has not significantly exceeded its previous high, which indicates that money is only moving between existing participants instead of expanding the market.
The era of a single narrative elevating the entire altcoin market is over, Key said. He also noted that structural innovations such as Economics of artificial intelligence agents He eventually created new value-based models for altcoins, but ruled out the return of the bullish wave based solely on simple narratives.
Key concluded by saying that the upside potential for altcoins in the short term is limited. He emphasized that the damage to investor confidence resulting from this decrease, will take a long time to heal.
