How Bitcoin's performance is driving away BTC investors

There has been a rally in the number of smaller investors reducing their BTC holdings.
Historically, this suggests capitulation and is often followed by a price rebound.

Bitcoin’s [BTC] recent price dip below $40,000 has resulted in a significant decline in the number of total wallets holding any amount of BTC. According to on-chain data provider Santiment, this decrease marks the fastest since the pre-bull run days of early October 2023.

📉👋 The amount of total #Bitcoin wallets have been declining at their swiftest rate since early October (just before the major #crypto #bullcycle started). The crowd is showing a similar level of impatience this time around with over 487K wallets holding 1 $BTC or pic.twitter.com/K6LwSWYUYM
— Santiment (@santimentfeed) January 26, 2024

Over 487,000 wallets holding 1 BTC or less have been liquidated in the past four days, suggesting a wave of impatience and disappointment among smaller investors.

This cohort of BTC holders left the market following the coin’s performance since the ETF approval. Many had predicted a rally above $50,000 post-ETF approval.

However, the coin’s price failed to witness such a surge, leaving many small traders scampering to cut their losses.

Exchanging hands at $40,122 at press time, BTC’s value has fallen by 17% since the ETF approval, according to data from CoinMarketCap.

Is BTC approaching its bottom?

According to Santiment, historically, this kind of decline in the holdings of small BTC owners is a sign of capitulation. This is mostly followed by a price rebound. It often signals a price bottom, a phase marked by renewed optimism that can help drive up the asset’s value.

AMBCrypto reported earlier that a capitulation event is required for the current price downtrend to end. This will happen if a significant selloff wipes out overextended long positions and a subsequent drop in selling pressure.

This would result in a plunge in the coin’s price and negative funding rates across all exchanges, presenting a buying opportunity for many, which might occasion a price rally.

To determine whether a price bottom is in, it is key to observe BTC’s Age Consumed metric. This metric tracks the movement of previously idle BTCs.

When Age Consumed sees a surge, it suggests that a significant amount of once-idle tokens have changed address. This hints at a sudden and strong shift in the behavior of long-term holders.

Conversely, when the Age Consumed metric dips, long-held coins remain in wallet addresses without being traded.

The metric is a good marker for local tops and bottoms because long-term holders do not often move their dormant coins around. Therefore, whenever this happens, it results in major shifts in market conditions.

According to data from Santiment, the last time BTC’s Age Consumed witnessed a significant surge was on the 16th of January, when the coin traded at $43,154.

Read Bitcoin’s [BTC] Price Prediction 2024-25

This has since been followed by a 7% drop, suggesting the possibility of that price point marking a local top.

For a bottom to be in, there has to be a sharp growth in BTC’s Age Consumed, followed by a rise in the coin’s value.