Here’s What This Means for the Market

On-chain data suggests Bitcoin has slipped into a distribution phase amid the latest market pullback.

Bitcoin began the new year on a strong note, briefly reclaiming $100,000 on Jan. 6 with a 4% surge. However, the asset has since faced a pullback, correcting by 5.22% on Jan. 7 and sliding further to $95K today. 

Glassnode Highlights Bitcoin Shift to Distribution  

Amid the turbulence, a Glassnode report today revealed that Bitcoin’s market has entered a distribution phase at the start of the year. 

The #Bitcoin market has shifted into a distribution phase at the turn of the year, with Accumulation Trend Score currently at 0.21. This suggests net selling across most holder cohorts: https://t.co/uQzUSqAQvx pic.twitter.com/SBy0ZGvOiS

— glassnode (@glassnode) January 8, 2025

For context, its Accumulation Trend Score, a metric tracking changes in wallet balances, now stands at 0.21. This low score suggests net selling among most Bitcoin holders, marking a change from the accumulation trend seen since October.  

To break this trend further, Glassnode called attention to the behavior of large wallet holders. The report confirmed that entities holding more than 10,000 BTC have been distributing consistently since September, with an increase in selling activity in recent weeks. 

Similarly, whales with 1,000 to 10,000 BTC have ramped up their sales over the past two weeks. Notably, this change in behavior shows reduced confidence or profit-taking among some of the largest market participants, which could weigh heavily on Bitcoin’s price in the short term.  

Profit-Taking on the Rise  

Data from CryptoQuant supports the Glassnode report, showing that many investors are now selling Bitcoin at a profit. The Adjusted Spent Output Profit Ratio (aSOPR), a key indicator of profitability, has risen to 1.04. 

This level indicates that most recent transactions involve selling at a gain, a positive sign on its own. While this signals healthy market activity, it can also suggest that the market might be approaching a local peak if profit-taking continues.  

Meanwhile, Darkfost, an on-chain analyst at CryptoQuant, also noted sharp behavior changes among retail investors. He explained that retail activity surged as Bitcoin neared $100,000, with demand variation increasing by over 30%. Such spikes often coincide with market tops. 

After Bitcoin hit $108,000 last year, retail demand fell drastically, dropping by 16%. Darkfost highlights that this decline in retail activity may provide a buying opportunity, as similar conditions in the past have preceded price rebounds.  

Bitcoin Currently in a Cooling-off Phase

Avocado, another on-chain analyst, believes the current market conditions represent a cooling-off phase rather than the end of the bull market. In a report on CryptoQuant, he pointed to several metrics supporting this view.  

For one, the Spent Output Profit Ratio (SOPR), smoothed over seven days, remains above 1 but is trending downward. This indicates declining profitability but has historically preceded rebounds during bullish cycles. 

Further, the Miner Position Index (MPI) shows no significant miner sell-offs, suggesting that mining companies remain confident about Bitcoin’s long-term potential. In fact, Marathon Digital has instead been accumulating. 

Other metrics, such as declining network fees and funding rates, further indicate a cooling phase. Reduced fees signal a slowdown in on-chain activity, while falling funding rates suggest that market sentiment is tempering. These conditions typically set the stage for future price recoveries.  

Bitcoin currently trades for $95,590 at press time, down 1.39% today. The token initially gave up the $95,000 support earlier today but has since recovered it. A push toward the Jan. 4 highs around $98,000 could help the bulls with a recovery campaign.