Bitcoin experienced a volatile week, briefly dipping towards the $60,000 level before staging a recovery. While dip buying provided some stabilization, analysts suggest this rebound may be a temporary pause within a broader corrective phase, leaving investors questioning the potential for further downside.
Bearish Signals Remain
A key indicator pointing to continued bearish sentiment is the elevated Relative Unrealized Loss. This metric, which measures the dollar value of underwater coins relative to total market capitalization, surged to approximately 24% during Bitcoin’s recent decline. This level is significantly above the typical transition zone between bull and bear markets, firmly placing the market in bearish territory.
However, the metric hasn’t reached extreme capitulation levels – historically exceeding 50% – suggesting that Bitcoin is currently undergoing an active capitulation process rather than hitting a definitive bottom. This implies ongoing selling pressure and the potential for continued volatility as the market seeks equilibrium.
Divergence in Wallet Activity
Analyzing the distribution of Bitcoin supply among different wallet sizes reveals a notable divergence. Wallets holding less than 0.01 BTC have been steadily increasing their share of the total supply. This group typically represents smaller retail investors who are often more susceptible to emotional reactions to price swings, and are currently accumulating Bitcoin.
Conversely, wallets holding between 10 and 10,000 BTC have exhibited mild net distribution during the dip. This is particularly noteworthy given the overwhelmingly bearish sentiment expressed on social media platforms. Despite the negative commentary, small traders are quietly increasing their exposure, potentially signaling a belief that current prices offer value.
This imbalance suggests that optimism hasn’t fully dissipated. Deeper bear market phases typically coincide with retail capitulation and aligned bearish social sentiment. Until small retail supply begins to decline, any rebounds may struggle to gain lasting momentum, limiting the upside of recovery attempts.
Network Activity Offers a Contrasting View
Despite the price weakness, network activity presents a contrasting signal. Bitcoin has seen a substantial increase in new addresses over the past week, with the number of investors conducting their first on-chain transaction rising by roughly 37%. This growth indicates continued interest in Bitcoin even as prices correct.
New entrants often emerge during periods of volatility, attempting to position themselves for potential recoveries. While this doesn’t guarantee an immediate price increase, it suggests that confidence in Bitcoin’s long-term value proposition remains intact.
This influx of new users can provide support during consolidation phases. However, if broader macroeconomic pressures persist, even strong network growth may not be sufficient to offset risk-off conditions in financial markets.
Key Price Levels to Watch
As of , Bitcoin is trading near $69,077, having rebounded from the $63,007 support level during the recent sell-off. Aggressive dip buying prevented a deeper slide towards $60,000, highlighting strong demand at lower levels, at least in the short term.
However, downside risk remains elevated. The broader macroeconomic outlook suggests that Bitcoin may still face further declines in the coming weeks. A breach of the $63,007 support would reinforce a bearish continuation, with the next major downside target potentially near $55,500, based on historical support zones.
A short-term recovery is possible if fresh capital inflows continue. Rising new address activity could help Bitcoin consolidate and reclaim $71,672 as support. Securing this level would invalidate the immediate bearish setup and signal stabilization, although it wouldn’t fully negate the broader bear market structure.
