Bitcoin is showing signs of recovery as institutional purchases resume, despite volatility risks and selling pressures from long-term holders.
Bitcoin is experiencing a period of consolidation amid low volatility, which analysts warn masks underlying market fragility. Recent data from Glassnode indicates that while Bitcoin's price reached $96,000, this surge was largely mechanical and driven by a short squeeze rather than new capital inflows.
The price currently sits within a historically significant supply zone ranging from $93,000 to $110,000, where long-term holders have coins purchased between April and July 2025. This supply could create selling pressure that inhibits further price increases. To maintain market optimism, Bitcoin needs to stay above the average purchase price of $98,300 for short-term holders.
Institutional Activity Stabilizes
Long-term holders have significantly decreased their selling activity, now averaging 12,800 BTC per week, a stark contrast to over 100,000 BTC during market peaks. Institutional flows appear to have stabilized, with spot ETFs returning to purchase Bitcoin, and buyers becoming more dominant on platforms like Binance. In contrast, aggressive selling on Coinbase has slowed, easing some downward pressure on prices.
Options Market Signals Caution
Despite some positive momentum, the options market is still signaling risks, with traders actively purchasing puts to hedge against potential declines. Dealers are positioned in a "short gamma" state within the $94,000 to $104,000 range, which could lead to increased volatility if significant market movements occur.
Analysts suggest that the first quarter of the year could be constructive for Bitcoin, especially if demand in the spot market continues to rise, potentially setting the stage for a new upward trend.
Shifting Market Sentiment
Sean Yang, chief analyst at MEXC Research, noted that Bitcoin's recent rise of over 8% since the start of January has countered the declines seen in the previous quarter. This shift may indicate a reduction in selling pressure, aligning Bitcoin's performance with safe-haven assets like gold.
"Historically, January brings an average growth of 9% for Bitcoin. The asset aims to test the $100,000 mark, and the current dynamics align with expectations," Yang stated.
Ethereum has also shown strong performance, rising 12% in two weeks, with predictions of a further increase of 12-20% by the end of January. Key drivers for this growth include:
- Liquidity Influx: The effects of quantitative easing are expected to benefit the crypto sector.
- Supply Shortage: Institutional demand for Bitcoin is outpacing miner production.
- Technological Advancements: Innovations in real-world asset (RWA) applications and privacy features are attracting new investors.
Notably, on January 13, exchange-traded funds linked to Bitcoin garnered $753.7 million, marking the highest inflow since October.
