All eyes are on the potential catalysts that could influence bitcoin's path during the rest of 2023, with bitcoin holders remaining steadfast despite a 10% market drop in two hours last week.

Topping the list is the impending court case between Grayscale and the Securities and Exchange Commission, according to Galaxy Digital’s Head of Firmwide Research Alex Thorn. 

The legal battle's outcome — which could see Grayscale’s GBTC product converted into a spot bitcoin ETF — could also be pivotal for the future of other pending spot bitcoin ETF applications, with “court watchers mostly expecting a win for Grayscale due to the judges’ reception to the SEC’s case during oral arguments in March,” Thorn said. Developments in the SEC’s cases against Binance and Coinbase could also move the market.

Markets would also likely respond positively if the crypto bills — designed to formalize rules for the industry — currently being considered by the U.S. House passed with sufficient support to force Senate action, Thorn argued.

Further weakness in the bond markets would provide a headwind for risk assets like bitcoin, Thorn warned, as well as additional rate increases from global central banks. However, if central banks signaled an end to the hikes, bitcoin could see improved performance.

Speculation surrounding Bitcoin’s April 2024 halving event — when the block reward gets cut in half — was also noted as a catalyst over the remainder of the year.

BTCUSD and past halvings. Image: Galaxy Digital.

A sudden market jolt

On Thursday, bitcoin prices experienced a sharp decline, dropping over 10% within just two hours to fall below its 200-week moving average. 

BTCUSD drops 10%. Image: Galaxy Digital.

The abrupt fall disrupted a phase of historically low volatility and saw bitcoin futures markets erase over $2.75 billion in open interest — marking the most significant decline since the FTX collapse in November 2022.

BTC perp futures open interest. Image: Galaxy Digital.

Compounding the situation was the dwindling spot volume on exchanges, with the monthly trading volumes in dollars reaching their lowest since October 2020.

Crypto exchange spot volume. Image: Galaxy Digital.

Long-term bitcoin holders undeterred

While short-term holders are grappling with unrealized losses at the highest level since January, which could lead to more near-term downside, long-term holders, particularly those with 10 bitcoin or less, are in an accumulation phase. 

BTC long-term holder net position change. Image: Galaxy Digital.

A record 40% of bitcoin's supply has also remained stationary on-chain for over three years, indicating long-term holders continue to accumulate and hold for longer.