Bitcoin profit taking triggers a 2 percent market drop

The global cryptocurrency market lost 2.10% of its value, bringing the total market capitalization to $3.17 trillion, its lowest level in five days.

This downturn has been led by Bitcoin (CRYPTO:BTC), which faces intense selling pressure amid easing geopolitical tensions in the Middle East.

U.S. President Joe Biden announced a U.S.-mediated agreement between Lebanon and Israel to end the conflict involving Hezbollah, reducing demand for safe-haven assets like Bitcoin.

Traditional markets remain uncertain, with tariff threats from former President Donald Trump further complicating investor sentiment.

Bitcoin’s price has dropped by more than 8%, falling from its November 22 peak of $99,830 to its current value of $91,377.

On-chain data from CryptoQuant shows that Bitcoin’s Profit and Loss (P/L) ratio is at levels comparable to its March 2024 peak of $73,400, signaling heavy profit-taking activity by long-term holders.

In the past 30 days alone, long-term holders have moved approximately $60 billion worth of Bitcoin, with November marking the largest profit-taking month in this market cycle.

Bitcoin’s recent price action has been hindered by a bearish divergence between its price and the Relative Strength Index (RSI), indicating overbought conditions and preventing a breakthrough past the $100,000 mark.

Analysts suggest that profit-taking near these price levels reflects typical market behavior as investors lock in gains during peak bullish trends.

The crypto market crash has extended into Bitcoin futures, with overleveraged positions contributing to higher volatility.

According to Nick Forster, founder of Derive, traders are shifting to protective strategies, as shown by a 30% drop in the call-put skew index for Bitcoin options expiring on December 27.

Options data suggests a 68% chance of Bitcoin trading between $81,493 and $115,579 by late December, with a smaller 5% probability of extreme moves to $68,429 or $137,645.

The expiration of $11.8 billion in Bitcoin options on December 27 could trigger significant price swings, as traders adjust their positions in anticipation of high volatility.

Some altcoins have mirrored Bitcoin’s losses, with The Sandbox (CRYPTO:SAND) dropping 12.03%, Stellar (CRYTPO:XLM) falling 10.07%, and Decentraland (CRYPTO:MANA) losing 8.24%.

Additional losers include Arbitrum (CRYPTO:ARB), Maker (CRYPTO:MKR), and Ethereum Classic (CRYPTO:ETC), all posting declines of over 5%.

Conversely, certain altcoins have gained during the downturn, led by Fantom (CRYPTO:FTM) with a 13.86% increase, followed by Sei (CRYPTO:SEI) at 13.55%, and Injective (CRYPTO:INJ) at 13.05%.

Algorand (CRYPTO:ALGO) also rose 10.59%, while Sui (CRYPTO:SUI) and Theta Network (CRYPTO:THETA) showed smaller yet notable gains.

Michael van de Poppe, founder of MN Trading, believes the market shows signs of overheating, suggesting a likely sideways phase for Bitcoin in the short term.

He noted, “The chances of a prolonged sideways phase for Bitcoin are high, although some altcoins may continue to perform well.”

Institutional interest remains strong despite the sell-off, as MicroStrategy recently purchased 55,500 BTC at an average price of $97,862, increasing its holdings to 386,700 BTC.

The long-term outlook for Bitcoin remains optimistic, with ongoing institutional confidence helping balance the challenges posed by short-term market fluctuations

At the time of reporting, Bitcoin price was $92,793.32.