Bitcoin 'Sell-off Signal' Triggered...Past Bottom Pattern Repeats

▲ Bitcoin (BTC)/ChatGPT generated image

In the Bitcoin (BTC) market, institutional holders sharply reduced their buying participation and then rebounded, suggesting a potential bottom signal.

NewsBTC reported on May 2nd that the buying participation rate of Digital Asset Treasuries (DATs), a group of companies holding Bitcoin, showed a similar pattern to past upward reversals, rebounding after a sharp decline.

DAT refers to a structure where companies hold cryptocurrencies on their balance sheets to provide price exposure to investors. MicroStrategy's continuous purchase of Bitcoin was cited as a prime example. According to data, DATs' buying participation rate decreased after the bearish trend strengthened, with a particularly sharp drop in April. Subsequently, it quickly rebounded from extreme low levels, indicating a potential structural shift. Charles Edwards, founder of Capriole Investments, stated, “These turning points have historically led to very strong rallies.” However, he added that with a limited sample size, it remains to be seen whether the same results will repeat.

On-chain analytics firm CryptoQuant analyzed that the recent rebound was driven by derivatives demand, not spot demand. They explained that overall demand increased, but spot demand actually decreased.

This structure was also observed during the 2022 bear market and subsequently led to further declines. CryptoQuant assessed, “While it doesn't guarantee the same outcome, structurally, it's a bearish signal.”

With the rebound in institutional buying participation and the expansion of derivatives-driven demand occurring simultaneously, the market has entered a phase where conflicting signals are clashing.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*