Bitcoin's high conviction holders are turning into sellers as the crypto's price hits new lows

Recent trends indicate that Bitcoin's most dedicated investors are beginning to sell as the cryptocurrency's value falls to new lows. According to a note from Compass Point, this shift may signal a critical juncture in the ongoing downturn of the crypto market. Long-term holders, defined as those who have kept their Bitcoin for at least 155 days, remained relatively inactive from February to April. However, recent weeks have seen them transition into sellers, with approximately $2.4 billion in Bitcoin sold in just the past two days. Analyst Ed Engel pointed out that this shift could significantly impact Bitcoin's supply and demand dynamics. Engel noted that 26% of the Bitcoin sold over the last month came from investors who had purchased it at prices exceeding $90,000. This group, typically resilient during bearish market conditions, is now capitulating as Bitcoin approaches its latest cycle lows. Engel remarked that capitulation among top buyers is a common occurrence in the later stages of bear markets, suggesting that Bitcoin's current downturn may be nearing its conclusion. Despite these developments, Bitcoin has struggled to regain its October peak of over $126,000, largely due to ongoing uncertainty surrounding geopolitical tensions, particularly related to the U.S.-Iran conflict. In contrast, the stock market has reached new highs, leading to skepticism among investors regarding Bitcoin’s perceived roles as both a 'digital gold' safe haven and a high-risk tech investment. Additionally, Bitcoin ETFs have experienced their longest streak of net outflows, marking the 11th consecutive day of withdrawals according to SoSoValue. Bitcoin's price has dropped by 10% this week, influenced by panic selling that followed a minor sale of 32 coins by Strategy, which initiated a wave of long liquidations. Analysts, however, suggest that this minor sale is not the primary driver of Bitcoin's price fluctuations. Citi analyst Alex Saunders highlighted that ETF flows account for approximately 45% of Bitcoin's weekly return variations and are crucial for tracking investor interest. Negative flow trends and diminishing prospects for a U.S. market structure bill, which investors see as a potential catalyst for renewed interest, further dampen the market outlook. Saunders concluded by indicating that market sentiment is likely to remain subdued, particularly as the disparity between Bitcoin and equity performance persists without positive regulatory news or a resolution to concerns about fiscal stability.