Bitcoin (BTC) Price: Recovery to $90,000 Follows Drop to $81,000 Last Week

TLDR

• Bitcoin recovered from $80,000 to $88,000-$90,000 after last week’s drop, providing temporary relief to traders
• Retail sentiment turned heavily bearish while whale wallets holding 10-10,000 BTC continue to reduce their holdings for six weeks
• MVRV ratios remain negative showing most traders are still at a loss, while new address creation dropped from 3.37 million to 2.21 million
• Strategists warn the bounce may not indicate a meaningful recovery, with correlation between Bitcoin and Nasdaq breaking down recently
• Analysts expect Bitcoin could retest $82,000 and potentially drop below $80,000 without increased institutional demand

The largest cryptocurrency now sits roughly 28% below its all-time high of $126,000 reached in October. The recent bounce has traders debating whether the low near $80,000 marked the best entry point of this cycle.

Data from Santiment reveals how drastically sentiment shifted during the decline. The ratio of bullish to bearish comments dropped sharply as traders declared the market had entered a bear phase. Retail commentary reached levels similar to previous cycle bottoms.

Funding rates provide additional context about market positioning. Heavy short positions often trigger quick rallies when liquidations begin. Current funding levels show elevated bearish positioning but remain below the extremes that marked October’s temporary low.

The short and long-term MVRV ratios for Bitcoin stay negative. This indicates most traders currently hold losses on their positions. Negative MVRV readings typically reduce selling pressure and can support short-term bounces.

Network Activity Declines

Bitcoin address creation has fallen from 3.37 million in mid-December 2023 to 2.21 million currently. Active addresses dropped from 963,900 to 729,200 over the same period. This decline in network usage raises concerns about reduced adoption during the current market conditions.

Torsten Slok, chief economist for Apollo Management, noted that Bitcoin and the Nasdaq Composite normally show high correlation. That relationship has broken down in recent weeks with Bitcoin experiencing a sharper decline.

The stock market showed strength with the S&P 500 and Nasdaq Composite aiming for a fourth consecutive day of gains. Investors increased bets on a Federal Reserve rate cut in December.

Whale Activity Raises Concerns

Wallet holders with 10 to 10,000 BTC, typically representing funds and trading companies, continue reducing their aggregate holdings. These large holders accumulated heavily from early September to early October. Their holdings peaked on October 6 then flattened on October 8 before declining for six weeks.

Smaller traders holding less than 0.1 BTC are buying during price dips. This pattern rarely forms market bottoms. Large investors have led major bull runs since 2020, and their current absence keeps the recovery uncertain.

Strategists at 10X Research pointed out that fourth quarter gains for Bitcoin typically require a catalyst. They expressed skepticism about a December Fed rate cut providing the necessary boost.

The firm noted Bitcoin has been highly dependent on Federal Reserve communication rather than rate cuts themselves. A December cut may not prove bullish for Bitcoin. A decision not to cut could increase the risk of a sharper sell-off.

Compass Point analyst Ed Engel has not called a bottom for Bitcoin. He described swift relief rallies followed by aggressive selling as a defining trait of bear markets. Engel identified near-term resistance between $92,000 and $95,000.

Engel stated he wants to see net accumulation from long-term holders and more aggressive short positioning from futures traders before turning more positive. He expects Bitcoin to retest the $82,000 level and potentially break below $80,000.