CryptoQuant analysts warn of potential capitulation in Bitcoin as investor sentiment weakens, with significant losses and market volatility observed.
Bitcoin's recent price surge has been met with signs of diminishing investor confidence, as indicated by the adjusted Spent Output Profit Ratio (aSOPR), according to CryptoQuant analyst Ignacio Moreno de Vicente.
“If current support levels fail and additional technical indicators confirm bearish momentum, we could be entering a capitulation phase,” – @MorenoDV_
Moreno de Vicente highlighted that each peak in Bitcoin's price has seen increasing profit-taking among investors, suggesting a growing lack of confidence as prices rise. The aSOPR indicator is currently in a downward trend, showing that more market participants are exiting positions as their returns decline.
As Bitcoin approaches critical support levels, approximately one-third of its total supply is reported to be at a loss, reflecting a heightened sense of fear in the market. Historically, such conditions have often created buying opportunities prior to price rebounds, but the current market is at a pivotal juncture.
On January 30, Bitcoin briefly fell to around $81,100, contributing to a 5.6% decrease in the total cryptocurrency market capitalization, which now stands at $2.9 trillion. Ethereum also saw losses, dropping to about $2,700.
During this downturn, Bitcoin spot ETFs experienced significant outflows, totaling $817 million, marking the largest daily withdrawal since mid-November. The market's decline has been attributed to a broader downturn in the tech sector, notably following a 12% drop in Microsoft shares.
“This represents an increase of roughly 31% since then, gradually reflecting the return of risk appetite among investors,” noted CryptoQuant analyst Darkfost.
Despite the recent corrections, there are signs of a renewed risk appetite among investors, with Binance's open interest rising to 123,500 BTC, a 31% increase since October 10. However, the market remains under pressure from tight liquidity conditions and concerns over high expenditures by tech giants in AI.
In addition to these factors, Bitcoin mining is facing challenges due to severe winter weather in the U.S., which has led to a significant drop in hashrate and miners' daily revenues. The profitability of the mining sector has been severely impacted, with production costs now at $69,000 and electricity costs at $55,000, raising concerns about the industry's sustainability.
“This has expanded the potential range for further price declines in the near term,” warned Charles Edwards, founder of Capriole Investments.
