Bitcoin retests key long-term holder supply zone as leverage clears, analysts say

Bitcoin retests heavy supply zone near $84,000

Bitcoin traded near $84,000 on Tuesday, retesting a price zone that holds more long-term holder supply than any other range, according to data from Glassnode.

Glassnode said the largest long-term holder cost-basis cluster is now concentrated between $84,000 and $85,000. Earlier, Glassnode had identified $81,000 to $86,000 as the key supply range for long-term holders.

Key facts at a glance

• Bitcoin traded near $84,000 after reaching $87,000 last week.
• Glassnode's largest long-term holder supply cluster sits at $84,000 to $85,000.
• Coin-denominated open interest - the total number of outstanding bitcoin futures contracts - has fallen to its lowest since March and almost 20% below August.
• Bitcoin is about 35% above its August low of $62,000.
• JPMorgan has referenced $85,000 as its estimated bitcoin production cost.

Leverage clears as open interest falls

Coin-denominated open interest has dropped to its lowest since March and is almost 20% below its August level, according to Glassnode. Bitfinex analysts said much of the leverage built during the breakout to $87,000 has largely been cleared, and perpetual positioning is now close to neutral. Perpetuals are a type of crypto futures contract without an expiry date.

Levels analysts are watching

Capital.com analyst Daniela Hathorn last week listed $87,000 to $88,000 as immediate resistance and $84,000 to $85,000 as the first area to watch on a pullback. JPMorgan has referenced $85,000 as its estimated production cost for bitcoin, which could give miners relief and reduce the risk of forced selling if sustained.

Bitfinex's base case is that bitcoin consolidates between the $84,000 long-term holder cluster and the $87,722 yearly open into the monthly and quarterly close on Sept. 30. The analysts said spot demand - direct buying of bitcoin - rather than financial conditions, is expected to determine how the range resolves.

Macro pressures weigh on bitcoin

Bitfinex said financial conditions have tightened since the Federal Reserve raised rates earlier this month. The 10-year Treasury yield closed at 5.17% on Sept. 25, up from 5.01% on Sept. 16, while the 10-year inflation-adjusted yield rose to 2.83% from 2.68%.

"The principal constraint on BTC this week is therefore the rising real return on low-risk assets, not sentiment," Bitfinex analysts said. "Any advance must be carried by spot demand."

Capital.com senior financial market analyst Kyle Rodda said rising crude prices are also weighing on non-yielding assets like bitcoin, which pays no interest or dividends. "As long as that upside risk to energy persists, bitcoin is likely to struggle to recapture upside momentum," Rodda said, adding that bitcoin's technical setup still looks "quite constructive."

What to watch next

Attention now turns toward the August core PCE reading on Sept. 30. Bitfinex also noted bitcoin's strength despite historically poor September and third-quarter trends. "The current strength seen, despite macro headwinds, points to an asymmetric bid that has outpaced other assets," the analysts said.

Institutional focus shifts toward using bitcoin

TD Cowen analyst Lance Vitanza said after the BitcoinTreasuries Conference in New York that institutional discussion was spending less time on whether investors should own bitcoin and more on how to use it. He said bitcoin's next phase may be driven not only by additional spot demand but also by the capital-markets infrastructure developing around it.

Sources

• The Block