Bitcoin Price Faces Extended Consolidation as Institutional Caution Grows, Analysts Warn

Market Structure Mirrors 2022 Consolidation Pattern

Bitcoin is currently trapped within a significant price range that could lead to an extended period of consolidation, according to recent analysis from onchain data provider Glassnode. The cryptocurrency has been oscillating between the True Market Mean at $81,100 and the short-term holder cost-basis at $98,400 ^[1].

In its Jan. 21 edition of The Week Onchain newsletter, Glassnode identified key areas of resistance that are constraining upside momentum and leaving rallies vulnerable to distribution ^[1]. The recent rejection near the short-term holder cost basis at $98,400 mirrors the market structure observed in the first quarter of 2022, when repeated failures to reclaim recent buyers' cost basis prolonged consolidation ^[1].

Between February 2022 and July 2022, Bitcoin spent months trapped between similar levels before entering an extended bear market that ultimately bottomed around $15,000 in November 2022 ^[1].

Supply Overhang Creates Persistent Resistance

Glassnode's Entity-Adjusted UTXO Realized Price Distribution metric, which tracks the prices at which current Bitcoin UTXOs were created, revealed a wide and dense supply zone above $100,000 that has been gradually maturing into the long-term holder cohort ^[1].

This unresolved supply overhang remains a persistent source of selling pressure that is likely to cap attempts above the $98,400 short-term holder cost basis and the $100,000 level, according to Glassnode ^[1]. The data provider emphasized that a clean breakout would require a meaningful and sustained acceleration in demand momentum ^[1].

Private wealth manager Swissblock noted that the Bitcoin Risk Index has climbed to 21, hovering just below the High Risk zone of 25, suggesting a likely continuation of the consolidation phase triggered by the massive high risk environment faced over recent months ^[1].

Historic ETF Outflows Signal Institutional De-Risking

US-based spot Bitcoin ETFs recorded their third consecutive day of outflows on Wednesday, totaling $708.7 million ^[1]. This marked the largest single-day exit in two months and the fifth-largest withdrawal from these investment products since their launch in January 2024 ^[1].

BlackRock's Bitcoin ETF, IBIT, posted the biggest outflows at $356.6 million, while Fidelity's FBTC followed with $287.7 million, alongside four other funds that experienced outflows ^[1]. Meanwhile, spot Ethereum ETFs recorded a combined net outflow of $286.9 million on Wednesday across five funds ^[1].

Analyst NekoZ characterized the past three days as witnessing a historic $1.58 billion exit from Bitcoin ETFs, with BlackRock and Fidelity leading the charge in heavy institutional de-risking ^[1].

Institutional Investors Unlikely to Drive Near-Term Rally

Macro researcher and FFTT founder Luke Gromen suggested that institutional investors are not likely to push Bitcoin to new highs without a significant market-moving catalyst. "If you're counting on institutional investors to run it from you know 90 to you know 150, if that's your plan, that's probably not going to happen without some major catalyst," Gromen said ^[2].

Gromen explained that institutional investors typically adopt a wait-and-see approach rather than aggressively pursuing price increases ^[2]. He noted that at the very least, this suggests there is substantial work ahead for Bitcoin ^[2].

However, CryptoQuant CEO Ki Young Ju maintained that institutional demand for Bitcoin remains strong, pointing to the 577,000 Bitcoin bought up by institutional funds over the past year, equivalent to roughly $53 billion ^[2].

Gromen also floated the possibility that Bitcoin could drop to $60,000 in scenarios involving an all-out trade war, US isolation from the rest of the world, or a recession ^[2]. He questioned whether treasury companies might become forced sellers in such circumstances, similar to the situation observed around the FTX collapse in 2022 ^[2].