After Bitcoin broke through its historical high last month, it experienced a sharp decline. EMC Labs, a cryptocurrency fund management company, has released a new report stating that the main reason for the decline of Bitcoin in March and April is related to the first wave of large-scale selling in the bull market. However, the first wave of large-scale selling is about to end, and it will lay the foundation for the next upward trend.
In the report, EMC Labs pointed out that in a bull market, new participants with abundant funds enter the market to buy chips, which prompts existing holders to sell. For long-term Bitcoin investors, the bull market is a time for strong selling.
EMC Labs mentioned that on December 3, 2023, which was the peak of long-term holders’ positions in history, they held a total of 14,916,832 BTC. With the gradual start of the bull market, long-term holders began their four-year cycle of periodic large-scale selling. As of March 31, a total of 897,543 BTC had been sold.
The report found that both long-term and short-term investors began large-scale selling on February 26. From February 26 to March 12, which was the first half of the selling period, Bitcoin was in a buying-dominated phase, and the price increased from $51,730.96 to $71,475.93.
During the second half of the selling period from March 13 to March 31 (which has not yet ended), Bitcoin was in a selling-dominated phase, and the price dropped from $73,709.99 to $60,771.74. From February 26 to March 31, sellers locked in nearly $63.1 billion in profits.
EMC Labs stated that although the scale of selling has significantly decreased by the end of March, it still exceeds $1 billion daily, which has led to failed price rebounds and a downward trend in April.
However, EMC Labs believes that the selling pressure is significantly diminishing, and the first wave of large-scale selling in the bull market is coming to an end. This wave of selling, close to the halving in April, has cleared a large number of profit chips and shifted the cost center of BTC, which will help drive the price up in the next phase.
EMC Labs explained that during the price increase period, whether the selling that locks in profits leads to a price drop depends on the balance of power between the bulls and bears. In the early stage of selling, sellers only test the market, and the price will continue to rise. As sellers continue to increase their selling scale, it eventually leads to the depletion of ammunition for the bulls, resulting in a price drop.
After the price drop, sellers begin to reduce their selling scale due to the price, and the buying power continues to recover, thereby driving the price up again. The two sides continue to compete in the price fluctuations until the next selling interval.
In the view of EMC Labs, selling is a normal phenomenon in the upward phase of the market. Based on the inflow of funds through stablecoins and ETF channels and the adoption of application chains, the institution judges that there will still be fluctuations in the future. However, this round of cryptocurrency bull market is unfolding in an orderly manner. For long-term investors, they should actively go long based on caution.
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