Bitcoin tests long-term holder supply cluster as leverage clears, analysts say

Bitcoin (BTC) traded near $84,000 on Tuesday, retesting a cluster that contains more long-term holder supply than any other price range, according to Glassnode.

Bitcoin traded as high as $87,000 last week before pulling back. Glassnode previously identified $81,000 to $86,000 as the key supply range for long-term holders. However, the largest long-term holder band has now concentrated between $84,000 and $85,000, the analysts noted on Tuesday.

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

Amid the price action, coin-denominated open interest has fallen to its lowest since March and almost 20% below its August level, according to Glassnode, while bitcoin trades about 35% above its August low of $62,000. Analysts at Bitfinex said much of the leverage accumulated during the breakout to $87,000 has largely been cleared, and perpetual positioning is now close to neutral.

Ranging into quarter-end

"Our 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 30 September," the Bitfinex analysts said on Monday. "Spot demand, rather than prevailing financial conditions, is expected to determine how the range resolves."

Meanwhile, TD Cowen analyst Lance Vitanza said in a Tuesday note to clients 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. Vitanza said bitcoin's next phase may be driven not only by additional spot demand, but by the capital-markets infrastructure developing around it.

On the macro front, Bitfinex said 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," the analysts said. "Any advance must be carried by spot demand."

Capital.com senior financial market analyst Kyle Rodda told The Block that the rise in crude prices is also weighing on non-yielding assets like bitcoin. "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."

Attention now turns toward the August core PCE reading on Sept. 30, while Bitfinex also noted bitcoin's defiance against 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.