Limited Demand for Bitcoin Investment Products
A significant factor contributing to Bitcoin’s stagnant price is reduced demand for investment products tied to the cryptocurrency. This decline in interest coincided with the Thanksgiving holiday in the United States, a time when trading activity generally slows down. Additionally, there has been a noticeable reduction in the flow of capital into Bitcoin-related investment vehicles.
Balances in spot Bitcoin ETFs have remained steady since November 25. Even after November saw periods of both record inflows and outflows. These factors point to a cooling of enthusiasm among institutional and retail investors alike.
A Balance Between Profit and Loss Forces
The Net Realized Profit/Loss metric, which measures the hourly changes in on-chain Bitcoin capital flows, highlights another reason for the price consolidation. On November 21, this metric peaked at $1.08 billion, reflecting a surge in realized profits. However, it has since dropped significantly, plateauing at around $33 million over the past week.
This stagnation in profit-taking and loss-incurring activity suggests that market participants are evenly split between those holding on for higher prices and those reluctant to sell at current levels. As a result, the market is in equilibrium, contributing to Bitcoin’s lack of significant price movement.
Technical Factors: Stuck Between Key Trendlines
On December 2, the price of Bitcoin slipped below its critical 50-period Simple Moving Average (SMA), which was pegged at $95,821 at the time. The resulting slump found the price catching support at the 100-period SMA at $95,051.
Since then, Bitcoin has risen back above the 50 SMA but has not managed to break through resistance at $98,200. Bitcoin must manage to overcome the resistance to move out of the current range. However, it faces additional barriers in the $96,422 to $97,111 range. Data from IntoTheBlock shows that over 733,760 addresses purchased approximately 597,620 BTC within this zone, creating a congestion area that is difficult to surpass.
On the other hand, Bitcoin has support from buyers in the $92,876 to $95,736 range. Here, about 688,690 addresses bought approximately 348,720 BTC. This support has helped Bitcoin avoid falling below its recent lows but has not been enough to trigger a significant price recovery.
Outlook for Bitcoin
For now, Bitcoin remains stuck in a consolidation phase. Limited demand, balanced market forces, and technical resistance levels are all contributing to its lack of upward momentum. Without a shift in investor sentiment, the price of Bitcoin will continue to stay within its range. Such stagnation can well prevail for a number of days to come, with market-wide liquidity and trading volumes remaining as dull.
