Bitcoin (BTC) price vulnerable to corrections as capital flows increase: Bitfinex

Ever since the United States Securities and Exchange Commission (SEC) approved the space for Bitcoin exchange-traded funds (ETFs) on January 10, BTC has seen significant selling pressure as short-term holders took huge profits.

In the latest edition of the weekly Bitfinex report, analysts at the crypto exchange warned that BTC is still vulnerable to a price correction as short-term holders are exiting their holdings.

BTC is prone to pull back

Bitcoin rose above $49,000 following the news of the ETF's approval, but stumbled by 15% and lost roughly $7,000 in 48 hours. Bitfinex rallied for a heavy sell-off, falling amid increased volatility and liquidity.

Short-term holders have struggled to make a profit on their purchase price, averaging around $38,000. According to the information on the chain, the value of 2.2 billion dollars “in the money” BTC was moved to the exchange by this group of investors when they executed their strategy to buy and sell the news.

On the other hand, long-term carriers recorded less activity during the same period, indicating stronger sensitivity and persistence. About 70% of Bitcoin's total supply has been inactive for over a year.

Bitfinex believes the market is still prone to corrections and pullbacks, although the selloff may have slowed slightly, as predicted in the exchange's 2024 outlook report.

“Short-term assumptions can affect the price of BTC in the short term, creating volatility and price fluctuations. The medium and long-term outlook for Bitcoin is still positive, although we still believe that further corrections are possible. Our optimism depends largely on the behavior of LTHs.” It's on,” said Bitfinex.

Increase in capital flow

Amid selling pressure from short-term holders, the market saw increased capital inflows, with the dollar-denominated ERC-20 stablecoin rising on exchanges. Stablecoin balances have risen to $20 billion from $18 billion at the beginning of the year.

According to historical data, the growth in stablecoin supply leads to an increase in the purchase of crypto assets, which is a sign of investor confidence. Investors are expected to use the increased liquidity to buy BTC, which will have a positive effect on the price of the main digital asset.

Therefore, an increase in stablecoins being produced or transferred to the exchange is considered a strong signal as major parties prepare to make large purchases.