Key Points
- Bitcoin’s price reached a new high of $126,192 before falling to $120,000 due to profit-taking activities.
- Long-term holders were seen to be moving large amounts of Bitcoin, causing a 4% correction and sparking $620 million in crypto liquidations.
Bitcoin’s value escalated to an unprecedented high above $126,192 on October 6. However, the surge was followed by a 4% decline towards $120,000. This drop was primarily attributed to profit-taking activities on October 7.
On-chain data indicated that this pullback was accompanied by unusual activities from dormant wallets. Derivatives indicators also suggested potential prospects for an early rebound.
Profit-Taking by Long-Term Holders
CryptoQuant analyst J. Martin alerted his followers about on-chain data that showed long-term holders cashing out at the peak. Wallets that had been inactive for 3 to 5 years were seen moving 32,322 BTC, equivalent to around $3.9 billion. This was the largest single-day transfer from dormant wallets for that year.
This sudden increase in activity from long-term wallets can introduce short-term bearish pressure. It can dilute the circulating supply by introducing large volumes of Bitcoin within a short period, thereby increasing sell-side pressure. It can also deter new entrants who may delay purchases to avoid the impact from active long-term holder sell-offs.
Early Rebound Prospects
Historically, large dormant movements have been observed near Bitcoin bull cycle tops. However, active demand from crypto ETFs and corporate treasury firms could potentially absorb the dormant BTC supply during the correction phase.
Bitcoin’s 4% correction, amid the $3.9 billion long-term holder sell-off, triggered widespread volatility across crypto markets. This led to total liquidations amounting to $620 million. Of these liquidations, the $454.87 million leveraged long positions closed accounted for 74% of the losses, while shorts saw $165.44 million wiped out.
Derivatives data, however, suggested that bulls are beginning to counteract the selling momentum. Over shorter timeframes, liquidation ratios showed a narrowing gap between long and short positions.
At the time of the report, total liquidation within the past hour totaled $12.42M, with $6.28M long and $6.15M in shorts. Bulls managed to cut the 74% loss incidence to 55%.
The reduction in long-liquidation dominance indicates that bulls are regaining balance. They are counteracting the downward price action with covering positions, as Bitcoin stabilizes around the $120,000 support zone.
On October 7, Jamie Dimon, CEO of JP Morgan Chase, said that a US government shutdown is unlikely to impact financial markets.
Record-setting ETF inflows from Blackrock and Strategy reaffirming long-term buying commitment following $3.9 billion Q3 profits could reignite investor confidence in Bitcoin’s price discovery. A rebound from $120,000 could trigger a $130,000 breakout attempt as markets anticipate another US Fed rate cut decision.
