Bitcoin (BTC) Market Experiences Uncertainty as Resurgence of Dormant Coins Coincides With Lackluster Demand

On-chain data has revealed that many long-held BTC have re-entered circulation. While this is usually a net positive for the coin's value, it has been met with low demand, potentially adding further downward pressure on Bitcoin's price.

Bitcoin (BTC) price faces a potential downturn due to a surge in dormant coins re-entering circulation without sufficient market demand.

On Wednesday, a Bitcoin whale withdrew 250 BTC from Binance after six months of inactivity, coinciding with a sharp increase in Bitcoin’s Age Consumed metric. This metric tracks the movement of long-held coins and surged by 1026% on that day.

Dormant BTC Re-Enters the Market

A post by Lookonchain highlights this development, noting that the last time a comparable surge in dormant BTC occurred was 90 days ago. Typically, when dormant BTC re-enters circulation, it signals a shift in the market trend.

Since long-term holders rarely move their coins, their decision to do so is usually a strategic response to market conditions. Historically, it has been a positive indicator for future price movements.

However, for this positive scenario to unfold, the movement of dormant coins must coincide with strong market demand. If these previously inactive coins re-enter circulation during a period of weak demand, it can increase selling pressure and drive down Bitcoin’s price — precisely what we’re seeing in the current market.

Bitcoin’s declining Chaikin Money Flow (CMF) highlights this weak demand. The CMF tracks the flow of capital into and out of the market and currently sits at -0.13, below the zero line. This suggests a liquidity exit, with more traders selling off their Bitcoin holdings, adding to the bearish pressure.

BTC Price Prediction: The Market Needs New Demand

The current surge in BTC’s supply without the demand to absorb it may cause its price to drop further in the meantime. According to BTC’s Fibonacci Retracement tool readings, if selling pressure gains momentum, the coin’s price could slip under $60,000 to test support at $58,464.

Should the bulls fail to defend this level, Bitcoin’s price may drop to $54,847.

However, if the coin witnesses a surge in new demand, the previously dormant coins re-entering circulation could be absorbed by buyers, potentially driving the price higher and invalidating the bearish outlook mentioned above. In this scenario, Bitcoin’s price could reach $68,474.

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