Bitcoin price has gradually recovered from its recent decline and has been trading cautiously in recent days. Although the recovery has been slow, fundamental data suggests potential challenges ahead.
A reduction in illiquid supply (long-term holdings that rarely move) could hinder Bitcoin’s ability to maintain its upward trajectory.
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Bitcoin holders are offloading
The supply of illiquid Bitcoin is starting to dwindle again, with around 62,000 BTC leaving inactive wallets since mid-October. This change indicates that more coins are back in circulation, increasing potential selling pressure.
As illiquid supply decreases, available liquidity often increases, making sustained price increases difficult.
Historically, shrinking illiquidity supply has reduced the conviction of long-term holders. Unless new inflows balance this movement, Bitcoin could face headwinds in sustaining its recovery.
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Buyer-seller dynamics indicate that most of the momentum traders have exited the market. On the other hand, market buyers have not intervened aggressively enough to counter the growing pressure from the selling side. This imbalance has weakened Bitcoin’s upward momentum, leaving it vulnerable to price stagnation and short-term retracements.
Additionally, first-time buyers remain largely inactive, highlighting limited spot demand. Lack of new capital inflows continues to weigh on market strength. The existing equilibrium between sellers and holders is likely to limit the likelihood of a Bitcoin breakout until a stronger wave of buyers emerges again.
BTC price may face a crash
Bitcoin price is currently $112,513, just above $112,500. Establishing this level of solid support is important for sustained recovery. However, weak inflows and cautious sentiment could make this position difficult to maintain as traders await strong signals of new demand.
The current market structure suggests that Bitcoin may struggle to break above $115,000. Unless the liquidity situation improves, the price trend could remain range-bound or consolidate above $108,000. Without strong buying momentum, any attempt to move higher can quickly run out of steam.
For Bitcoin to aim for $120,000, renewed interest from both retail and institutional investors is essential. A decisive move above $115,000 will likely invalidate the bearish scenario, sparking new momentum and attracting new capital into the market.
