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According to Santiment, an on-chain analytics firm, as the value of Bitcoin, Ethereum and other crypto assets fell, traders were selling at a loss rather than a profit.
It notes that, historically, when the crowd is exiting their positions more frequently at a loss, bottoms are more likely to form.
📊 #Bitcoin & #Ethereum are both having more traders sell at a loss than at a profit this week, the first such week so far in 2023. Historically, once the crowd is exiting their positions more frequently at a loss, bottoms are more likely to form. https://t.co/maEg5sDHM6 pic.twitter.com/0kvPUzbTQm
— Santiment (@santimentfeed) February 26, 2023
"Bitcoin and Ethereum are both having more traders sell at a loss than at a profit this week, the first such week so far in 2023. Historically, once the crowd is exiting their positions more frequently at a loss, bottoms are more likely to form," Santiment wrote.
The possibility of higher interest rates for a longer period to tame inflation caused Bitcoin to end in the red on Sunday for the third consecutive week.
A key U.S. inflation gauge posted higher than anticipated readings, pushing the U.S. dollar close to year-to-date highs, while riskier assets fell broadly. The U.S. regulatory crackdown that followed the failure of the FTX exchange is also putting pressure on the cryptocurrency market.
The increase in February's price of Bitcoin, the largest cryptocurrency by market value, is paltry in comparison to January's 39% increase.
At the time of publication, the price of Bitcoin had increased by nearly 0.93% to $23,402. Similarly, Ethereum (ETH) increased by 2.2% to $1,637.
Mixed indications
If history is any indication, investors should be cautious of Bitcoin's waning two-month rally, according to Bloomberg analysts.
Tomiwabold OlajideSince March 2020, there have been five instances similar to when Bitcoin increased over two consecutive months with a smaller gain in the second stanza. In four of the cases, it fell back in the third month, with an average loss of 5.8%. Bitcoin was only subject to an exception in February 2021, when it was experiencing a strong bull run.
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